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Stelrad Group plc Annual Report 2023
Robust strategy.
Resilient
performance.
Stelrad Group plc
Annual Report 2023
OUR CORE PURPOSE
Helping to heat
homessustainably
» Read more on page 26
UNDERPINNING FOUNDATIONS
Conducting business
responsibly
» Read more on page 35
STRATEGIC PILLAR
Driving better
environmental
performance
» Read more on page 29
STRATEGIC PILLAR
Enabling an
exceptional
workforce
» Read more on page 33
STRATEGIC REPORT
01 Highlights
02 At a glance
04 Our investment case
06 Chair’s statement
08 Chief Executive Officer’s review
10 Market overview
11 Market trends
12 Our business model
14 Our strategy
16 Strategy in action
20 Key performance indicators
22 Stakeholder engagement
26 Sustainability Report
42 Finance and business review
48 Risk management
55 Viability statement and going concern
56 Non-financial and sustainability
information statement
GOVERNANCE REPORT
57 Chair’s introduction to governance
58 Board of Directors
61 Statement of corporate governance
65 Audit & Risk Committee Report
70 Nomination Committee Report
74 Directors’ Remuneration Report
88 Directors’ Report
FINANCIAL STATEMENTS
92 Independent auditors’ report to the
members of Stelrad Group plc
98 Consolidated income statement
99 Consolidated statement of
comprehensive income
100 Consolidated balance sheet
101 Consolidated statement of
changes inequity
102 Consolidated statement of cash flows
103 Notes to the consolidated
financial statements
139 Company balance sheet
140 Company statement of changes
inequity
141 Notes to the Company
financialstatements
ADDITIONAL INFORMATION
144 Shareholder Information
Highlights
• Revenue down 2.6%, 12.9% on a
like-for-like basis, to £308.2million,
driven by subdued new build
and renovation activity due
to high inflation and interest
rateenvironment.
– UK & Ireland: revenue down 0.5%
(0.6% like-for-like) broadly flat
despite market headwinds.
– Europe: revenue down 0.4%
(21.2% like-for-like) as a result of
depressed levels of RMI activity.
– Turkey & International: revenue
down 25.8% (30.5% like-for-like)
driven primarily by volume
decline in China.
• 13.0% rise in contribution per radiator,
the sixth consecutive year on year
increase, driven by proactive price
and cost management.
• Volume mix of higher added-value
premium steel panel radiators
maintained despite challenging
market backdrop.
• Operating profit rose to £26.7million,
an increase of £4.1 million, benefiting
from foreign exchange gains
and the discontinuation of IAS
29 accounting, partially offset by
adverse sales volumes and higher
depreciation charges.
• Adjusted operating profit of
£29.3million was adversely
impactedby a 5.2% volume decline
and a £3.7million increase in
depreciation and amortisation
charges, partially offset by proactive
margin management and cost
reduction initiatives.
• Cost base management initiatives
implemented in the second half
of 2023, resulting in an exceptional
charge of £2.9 million in the current
year, with benefits to be realised from
2024 onwards.
• Strong cash flow performance driven
by working capital management and
areturn to a maintenance level of
capital spend.
• Leverage at 31 December 2023 was
1.47x (2022: 1.62x), based on net debt
before finance leases.
• Recommended unchanged final
dividend of 4.72pence per share
(2022 final dividend: 4.72 pence per
share), to be paid on 29 May 2024,
reflecting the Board’s confidence
in the Group’s prospects and
balance sheet.
Revenue
£308.2m
(2022: £316.3m)
Adjusted operating profit
(1)
£29.3m
(2022: £34.0m)
EPS
12.11p
(2022: 3.38p)
Free cash flow
(1)
£17.8m
(2022: £12.7m)
Adjusted EPS
(1)
13.62p
(2022: £19.11p)
Operating profit
£26.7m
(2022: £22.6m)
Resilient performance,
strategically positioned
formarket improvement
stelradplc.com
Visit us online to see how we are
innovatingto drive sustainability
(1) The Group uses some alternative performance measures to track and assess the underlying performance of the business.
Alternative performance measures are defined in the glossary of terms on page 21 and reconciled to the appropriate financial
statements line item in note 33. Note 33 also outlines the limitations of using alternative performance measures.
Financial and operational highlights
Annual Report 2023 Stelrad Group plc 01
At a glance
Our brands
Innovative design brand
Combining advanced technology with designer
style, the DL Radiators brand offer includes
heatemitters suitable for a wide variety of heat
sources and heating systems.
Europe’s number one brand
Stelrad, our premier brand, is sold across the world.
The Netherlands’ number one brand
With a strong presence in the Netherlands,
Belgium, the UK and France, Henrad is a
channeldifferentiated European brand.
Turkey’s number five brand
Mainly sold into Turkey and Eastern European
markets, the Termo Teknik brand offers a high
ratioof quality to cost.
Premium design brand
Representing the best of Danish design, Hudevad
is a favourite brand of architects, interior designers
and commercial specifiers.
Our products
Electric, hybrid
and dual
fuel radiators
Standard steel
panel radiators
Premium steel
panel and
low surface
temperature steel
panel radiators
Column and
decorative steel
tubular radiators
We are Europe’s leading
radiator manufacturer and
ourcore purpose is helping
toheat homes sustainably
Towel warmers
Data source: BRG Building Solutions.
Stelrad Group plc Annual Report 202302
STRATEGIC REPORT
Our ESG strategy
Consistent with our core purpose, helping to heat homes
sustainably, Fit for the Future is Stelrad’s sustainability
framework. It sets out our approach to delivering both our
business strategy and our sustainability commitments
to stakeholders and the environment. It reflects Stelrad’s
visionof the significant role we can play in the transition to
alow – and ultimately zero – carbon heating industry.
Underpinned by the fundamental issues of safety, governance
and responsible supply chain management, Fitfor the Future
has two strategic pillars.
Driving better environmental performance focuses on
reducing Stelrad’s environmental impact whilst engaging,
educating and influencing others to transition effectively to
the heating systems of the future. Enabling an exceptional
workforce ensures our people contribute positively to the
delivery of our strategy and our sustainability objectives.
» Read more in the Sustainability section on page 26
» Read more about our markets on page 10
Our markets
UK & Ireland
£139.4m
Stelrad Group
£308.2m
Europe
£149.1m
Turkey & International
£19.7m
Market-leading international presence
Supported by an extensive sales and marketing network,
Stelrad’s well-invested, state-of-the-art manufacturing and
distribution operations are designed to provide our customers
with high levels of service and product availability, wherever
they are based.
» Read more in our market overview on page 10
Head office
Manufacturing,
distribution and sales
Distribution warehouse
Sales presence
Head office
Newcastle upon Tyne, UK
1
Termo Teknik
Çorlu, Istanbul, Turkey
4
UK Radiators
Mexborough, UK
2
Continental Radiators
Nuth, Netherlands
3
Radiators SpA
Moimacco, Italy
5
Hudevad
Kolding, Denmark
6
Caradon Polska
Kraków, Poland
7
1
2
3
6
5
7
4
500+
customers
40+
countries
1,400+
people
Revenue
FIT F R THE
FUTURE
» Read more in our financial statements on page 98
Annual Report 2023 Stelrad Group plc 03
#1
steel panel radiator market
share position in Europe, market
leadership in seven countries
– the UK, Ireland, France, the
Netherlands, Belgium, Denmark
and Greece – and a Top 3 position
in a further nine
A long-term player of scale in the
European heat emitter market
• Operating in a market with
highbarriers to entry
• Providing cost leadership and
unrivalled operational flexibility
from a multisite manufacturing
and logistics platform
14.9%
design radiator mix, including
premium steel panel radiators, an
increase of 2.4 percentage points
versus 2022, 6.0 percentage
points since 2021
Attractive long-term dynamics led
by replacement demand in mature
European markets
• Proven financial resilience
through challenging economic
cycles, including 2008’s global
financial crisis, the Covid-19
pandemic and the current
macroeconomic environment
• Broad geographic spread
and underlying growth in
higher value design radiators,
coupled with focused and agile
costmanagement
Leading
market position
Robust
business model
» Read more about our markets on page 10 » Read more about our business model
on page 12
In 2023, Stelrad’s
resilient performance
in challenging market
conditions was testament
to our robust strategy, our
management experience
and the commercial and
operational agility to
respond effectively to the
prevailing macroeconomic
environment. The integration
of Radiators SpA and
continued focus on home
heating decarbonisation
ensure the Group is well
positioned for future growth
as markets recover.
Trevor Harvey
Chief Executive Officer
Data source: BRG Building Solutions.
Stelrad Group plc Annual Report 202304
STRATEGIC REPORT
Our investment case
500+
customers in 40 countries
A lean, customer-orientated
leadership team with unparalleled
sector experience
• Flat management structure with
clear focus on quality, customer
service and innovation
• Effective channel management
driven by a multibrand strategy
and proactive adaptation to
evolving routes to market
80.2%
growth in contribution per
radiator between 2018 and 2023
A track record of consistent growth
• Sector-leading margins
• Strong cash generation and
return on capital employed
41.5%
energy from renewable sources
With a growing range of innovative
heat emitters and our Fit for the
Future framework ensuring delivery
of both our business strategy and
sustainability commitments, Stelrad
is positioned effectively for the
transition to low and zero carbon
heating over the coming decades
• Anticipated pan-European
legislation relating to home
heating and reduced fossil
fuel use is expected to present
favourable growth drivers for
higher output heat emitters
suitable for lower temperature
heating systems
• Stelrad and all its stakeholders
will benefit from long-term
sector transition to a more
sustainable heating model
Strong
financial position
Long-term focus
ondecarbonisation
and ESG
Experienced
management and
effective strategy
» Read more about our strategy on page 14
» Read more about our Board of Directors
on pages 58 and 59
» Read more about our KPIs on page 20 » Read more about our ESG priorities
on page 27
Annual Report 2023 Stelrad Group plc 05
Dear shareholders
Stelrad has delivered another extremely robust
financial performance during 2023, despite challenging
macroeconomic conditions. Inflationary pressures, higher
interest rates and the resulting pressure on household
budgets over the past year negatively impacted the
housing market and constrained investment in renovation.
Our performance in this environment is testament to the
resilience and flexibility of the Group’s business model, the
strength of Stelrad’s market positioning and the robustness
ofits strategy.
In the face of these challenges, management’s considerable
experience of trading through numerous other challenging
market cycles enabled the business to navigate wider market
conditions successfully and deliver another robust financial
performance during the period, with proactive price and
cost management leading to a 13.0% increase in contribution
per radiator.
Although the Group is not anticipating an improvement in
macroeconomic conditions during 2024, Stelrad is confident
that it is well positioned for a sustained period of profitable
growth when markets recover.
Performance and results
Operating profit was £26.7 million, after exceptional items
of £2.5 million and amortisation of customer relationships
of £0.1 million. After adjustment for these items, Stelrad’s
adjusted operating profit
(1)
of £29.3 million was in line with
market expectations, despite a 5.2% reduction in volume and
a 2.6% revenue reduction. The Group responded quickly and
effectively to 2023’s difficult trading environment, leveraging
its market leadership position and maintaining clear focus on
its key strategic objectives.
Purpose
Stelrad’s purpose is helping to heat homes sustainably.
Through its evolving product range, its relationships with
both suppliers and channels to market and its influence on
heating system specifiers, the Group has a pivotal role to
play in the transition to low – and ultimately zero – carbon
heating systems. Meaningful progress was made in 2023,
through an enhanced and expanded product portfolio and
the publication of Stelrad’s first Environmental Product
Declarations (“EPDs”).
Strong performance
inachallenging
marketenvironment
Despite well-documented
headwinds impacting volumes
in new build and RMI across
Europe, Stelrad continues
to deliver a robust financial
performance and is making
clear progress on sustainability
and its strategic objectives.
Bob Ellis
Chair
(1) The Group uses some alternative performance measures to
track and assess the underlying performance of the business.
Alternativeperformance measures are defined in the glossary
of terms on page 21 and reconciled to the appropriate financial
statements line item in note 33. Note 33 also outlines the
limitations of using alternative performance measures.
Stelrad Group plc Annual Report 202306
STRATEGIC REPORT
Chair’s statement
Environmental, social and governance
(“ESG”)objectives
Achieving our purpose, helping to heat homes sustainably,
demands relentless focus on reducing Stelrad’s own
environmental impact, a consistently high level of employee
engagement and high standards of corporate governance.
These elements are at the heart of Stelrad’s culture
and values.
Our sustainability framework, Fit for the Future, is consistent
with that core purpose, setting out our approach to delivering
both our business strategy and our sustainability commitments
to stakeholders and the environment. It reflects Stelrad’s vision
of the significant role the Group can play in the transition to
alow – and ultimately zero – carbon heating industry.
Board
George Letham, Chief Financial Officer and Executive
Director of the Company, stepped down from the Board on
22 November 2023. George joined in 2003 and has played an
instrumental role in improving Stelrad’s market position and
financial performance. He has been retained on a part-time
basis for a six-month period, in the capacity of Strategic
Adviser to the Chief Executive Officer.
Following a rigorous recruitment process supported by
an external search firm, George has been succeeded by
Annette Borén, a highly experienced CFO who brings with
her a proven track record in delivering financial leadership,
operational excellence and strategic growth across different
geographies and sectors. Most recently, she was CFO for
Northern Europe at Hilti, a world leader in the manufacture
of construction tools. Annette brings with her a wealth
of experience which will enable her to make a significant
contribution to the continued growth and success of
the Group.
During the period, Terry Miller, Non-Executive Director and
Senior Independent Director, stepped down from the Board
and its Committees on 31 December 2023. She was replaced
by Katherine Innes Ker as Senior Independent Director, who
joined the Board on 1 February 2024 and brings significant
listed company board experience in a Non-Executive capacity.
On behalf of the Board, I would like to express our
appreciation for George’s contribution and commitment
during 20 years at Stelrad, which leaves the Group in a strong
position for future growth. We wish George all the very best
in his retirement. I would also like to thank Terry for the
contribution that she has made to the Company over the
pasttwo years and to wish her well for the future.
Governance
In line with its status as a company with a premium
listing on the Main Market of the London Stock Exchange,
Stelradiscommitted to high levels of corporate governance.
Our compliance with the 2018 edition of the UK corporate
governance code is set out in the Governance Report
on page 57.
Dividend
The Board is recommending an unchanged final dividend
of 4.72 pence per share. The final dividend will be paid on
29May 2024 to shareholders on the register on 26 April 2024,
subject to approval by shareholders at the Annual General
Meeting on 22 May 2024.
Summary
Stelrad’s management strength and experience, in
combination with a robust strategy and a resilient business
model, enabled the Group to deliver a strong financial
performance in 2023 despite the significant headwinds
impacting market demand.
Although these headwinds are set to continue into 2024,
Stelrad is well-positioned to capitalise as markets recover.
The flexibility of the Group’s business model, market leading
positions, and the strength and breadth of the customer and
supplier relationships means that the Group looks forward
with confidence to achieving its key strategic objectives.
Bob Ellis
Chair
8 March 2024
Annual Report 2023 Stelrad Group plc 07
Well positionedto outperform
the market and capitalise
oncemarkets improve
Stelrad’s financial performance
in 2023 is testament to the
resilience and flexibility of our
business which has enabled
us to deliver results in line with
expectations. We have been
able to significantly offset
a decline in volumes with
proactive margin management
initiatives, positioning the
Group well to capitalise once
markets improve.
Trevor Harvey
Chief Executive Officer
Overview
2023 saw a continuation of the macroeconomic headwinds
and challenging trading conditions that persisted throughout
2022. Nevertheless, our strong performance in the year is
testament to the resilience and flexibility of our business
model, the strength of our market positioning and the
robustness of our strategy, combined with management
experience of successfully navigating previous market cycles.
This experience meant that we were able to proactively
leverage the flexibility of our well-invested operational platform,
implementing cost-saving initiatives in the second half of 2023
that will lead to tangible benefits from 2024 onwards.
We made significant progress over the course of 2023,
integrating the Radiators SpA acquisition and expanding
our product portfolio compatible with low and zero carbon
heating systems – including the launch of our first UK electric
heat emitter range – and we continue to leverage our scale
and market leadership to ensure Stelrad is well-positioned for
market recovery.
Strong financial performance, proactive
response to market headwinds
In 2023, Stelrad’s revenue fell by 2.6% versus the prior year to
£308.2 million, including the full year benefit of the Radiators
SpA acquisition and equating to 12.9% like-for-like reduction.
Operating profit was £26.7 million (2022: £22.6 million), an increase
of £4.1 million, whilst adjusted operating profit 
(1)
was £29.3million
(2022: £34.0 million), in line with market expectations.
In the UK & Ireland, 2023 revenue was 0.5% lower than in 2022,
a strong performance given the wider market uncertainty
during the period, whilst adjusted operating profit increased
by 7.8%. In Europe, 0.4% decline in revenue resulted in an
adjusted operating profit reduction of 34.7%, reflecting lower
volumes, low margins in Radiators SpA and a mix shift. In
Turkey & International markets, driven by volume decline in
China, revenue and adjusted operating profit fell by 25.8% and
34.4% respectively.
Market conditions in 2023 remained extremely challenging,
with a combination of high inflation and high interest rates
suppressing both housebuilding and renovation demand and
driving continued distributor focus on inventory reduction,
notably across mainland Europe.
Despite this market backdrop, Stelrad improved contribution
per radiator for the sixth year running, delivering a further
13.0% increase relative to 2022. This contribution growth
countered a 5.2% decrease in volume over the same period,
which represented a reduction of 12.5% on a like-for-like basis.
(1) The Group uses some alternative performance measures to
track and assess the underlying performance of the business.
Alternative performance measures are defined in the glossary
of terms on page 21 and reconciled to the appropriate financial
statements line item in note 33. Note 33 also outlines the
limitations of using alternative performance measures.
Stelrad Group plc Annual Report 202308
STRATEGIC REPORT
Chief Executive Officer’s review
Operational flexibility
Our flexible operational platform, based on Stelrad’s standardised
core heat emitter design and with our long-established,
low-cost Turkish facility at its core, continues to provide
significant competitive advantage. In combination with
proactive price management, this has driven consistent
yearon year contribution improvement.
During the second half of 2023, we further optimised our
operational facilities to enable a programme of cost-saving
initiatives which will benefit the Group from 2024 onwards.
TheGroup has optimised production across its Western
European facilities with increased volumes transferred to
our low cost facility in Corlu, Turkey. In addition, we have
reduced fixed costs in Western Europe. The Group expects
market environments to remain challenging in 2024
with the continuation of cost and wage inflation, and this
reorganisation positions the Group well to mitigate these
adverse factors.
Improved product mix
The Radiators SpA acquisition brought a considerable
improvement in Stelrad’s product mix in 2023. Higher
added-value premium steel panel and other design radiators
accounted for 8.9% of the Group’s sales by volume in 2021,
rising to 12.5% in 2022. This increased to 14.9% in 2023, a
6.0 percentage points improvement versus 2021 and up
2.4percentage points relative to the prior year.
Total volume of the design radiator category, including
premium steel panel products, rose by 13.2% in 2023 relative
to 2022 and was 43.8% higher than in 2021, the year before the
Our strategy in action
New products for decarbonised home heating
Stelrad launched its first UK range of electrical radiators
in the second half of 2023, benefiting from Radiators
SpA’s comprehensive electric portfolio to introduce
an innovative and targeted range of heat emitters,
including towel warmer, aluminium and designer
ranges, into the small but growing UK electrical radiator
market. The introduction was well received in both new
build and replacement market segments, generating
specification by a leading UK housebuilder and stocking
commitments from leading electrical distributors.
TheElectric Series leverages Radiators SpA’s know-how
and Stelrad’s strong customer relationships, positioning
Stelrad effectively in a segment with significant
decarbonisation growth potential.
» Read more on page 18
Radiators SpA acquisition took place. As markets recover, the
underlying long-term growth trend for all design radiators,
and notably premium steel panel products, means that
Stelrad is well placed to capitalise on its improved market
share position and enhanced product portfolio.
Within the design radiator category, premium steel panel
radiator volume represents a key performance indicator for
Stelrad. Although volume in 2023 declined by 4.9%, premium
steel panel mix of total steel panel radiator volume increased
by 0.2 percentage points, from 6.0% to 6.2%.
Radiators SpA
The strategic acquisition case for Radiators SpA is compelling,
with the business already providing the Group with market
share growth, increased access to key territories and
channels to market and a product range orientated towards
higher added-value designs, including those suitable for
decarbonised heating systems. A combination of challenging
market conditions and low levels of profitability with a major
customer meant that 2023 financial performance was
below expectations. Whilst macroeconomic headwinds will
continue into 2024, improved product mix through new
product introduction at that key account is anticipated to
deliver improved profitability overall.
Outlook
Stelrad’s resilience in the face of significant macroeconomic
headwinds demonstrates the robustness and flexibility
of the Group’s business model and the effectiveness of
our long-term strategy, driven by our four key strategic
objectives: growing market share, improving product mix,
optimising routes to market and positioning effectively
fordecarbonisation.
After challenging for many years, Stelrad has now gained
market leadership of both the steel panel radiator category
and the hydronic heat emitter market in total, across the
combined market of Europe, the UK and Turkey.
Across our core markets, Stelrad is leveraging its strong
brands and Radiators SpA’s wider product portfolio to
improve our positioning for decarbonisation, as evidenced by
the launch of our first range of electric radiators into the small
but growing UK market.
We continue to expand our range of higher heat output
emitters, fully compatible with the low temperature hydronic
systems heated by low and zero carbon sources. In 2024, we
are preparing to launch Stelrad Green Series, our first radiator
range using steel manufactured with 90% lower embodied
CO
2
emissions.
Although we expect macroeconomic headwinds to continue
into 2024, our considerable management experience through
other challenging market cycles will enable us to navigate
this turbulence to deliver a robust financial performance.
In combination with our focused strategy, this positions
Stelrad effectively for a sustained period of profitable growth
as markets recover, benefiting from strong underlying
replacement demand across Europe and the long-term
regulatory tailwinds for decarbonised energy efficient
heating systems.
Trevor Harvey
Chief Executive Officer
8 March 2024
Data source: BRG Building Solutions.
Annual Report 2023 Stelrad Group plc 09
Market-leading scale in steel
panel radiators, flexible low-
cost manufacturing facilities
and an extensive, customer
focused logistics platform
underpin Stelrad’s resilient
long-term performance
The European heating market is driven by replacement demand. As 80% of currently
installed heating systems function through water circulation, hydronic radiators dominate
the European market now and are expected to do so in the future. Steel panel radiators
are the most popular hydronic heat emitter and will be a key enabler of the transition to
low-carbon, low-temperature heating systems.
Residential heating
systems by type
Hydronic heat emitters
by type
Steel panel radiator
demand drivers
Stelrad operates across three core geographies
UK & Ireland
51%
2022 market share
UK & Ireland represented 45% of the
Group’s 2023 revenue and Stelrad
maintained a clear market leadership
position in 2022, the latest year for
which data is available.
Data source: BRG Building Solutions.
Europe
11%
2022 market share
European sales represented 48% of
Stelrad’s 2023 revenue. The Group
moved into the number one position in
France and Greece in 2022 and retained
market leadership in its core markets
of Belgium, the Netherlands and
Denmark, with a challenger position in
six countries and number three position
in three more, including Germany.
Turkey & International
7%
2022 market share
With a number five share position
in both Turkey and China, Stelrad’s
third geography represented 7%
of2023 revenue.
» Read more about our strategy inaction
on page 16
57%
steel panel
radiators
80%
hydronic
radiators
56%
replacement
and first time
installation
Stelrad Group plc Annual Report 202310
STRATEGIC REPORT
Market overview
Our robust strategy is aligned with underlying market trends
Historical market stability continues to be
impacted by macroeconomic headwinds
Fundamentals for premium design
radiatorsremainstrong
Replacement is the primary volume driver
A positive outlook for radiators in
decarbonised heating systems
In 2023, the hydronic radiator market faced ongoing
challenges as high inflation, high interest rates and
low consumer confidence impacted volume across all
geographies and market sectors. These challenges are
expected to continue prior to volume stabilisation during
the latter stages of 2024. Following the Covid-19 pandemic
in 2020, volume in 2021 rebounded immediately to
typical 2009 to 2019 historical levels but post-2024, we
are prepared for a more measured recovery as economic
conditions and underlying demand improve.
Our opportunity
In 2023, Stelrad’s operational flexibility and agile response
to macroeconomic conditions enabled a restructuring
programme to optimise capacity for market demand
levels, an exercise facilitated by our previous programme
of investment to ensure low-cost manufacturing from
state-of-the-art assets. Coupled with high levels of
customer service and product availability from our
logistics platform, Stelrad remains well positioned to ride
out these short-term challenges and profit from healthy
long-term fundamentals. Our position of scale provides a
clear opportunity to act as a consolidator, gaining share
as smaller players exit the market.
In 2023, the prevailing economic climate has driven
greater customer focus on lower cost solutions. Theheat
emitter category has proved no exception, with the
market volume of premium steel panel and other design
radiators being more impacted than that of standard
steel panel radiators. The long-term fundamentals for
design radiators remain positive, however. Alongside an
increasing interior design focus in mature markets will be
an anticipated rise in home heating system renovation,
driven by heat source decarbonisation.
Our opportunity
In 2023, following the acquisition of Radiators SpA,
Stelrad’s premium steel panel and design radiator
volume was 13.2% higher than in 2022 and 43.8% higher
than in 2021. With a combination of state-of-the-art, low
cost manufacturing operations and the widest range of
premium steel panel radiators on the market, the Group
offers an affordable design radiator which can be installed
as a direct replacement for standard steel panel products.
In addition, Stelrad’s leading brands and unrivalled
channel access provide further opportunities to develop
Radiators SpA’s portfolio across our core markets as
consumer confidence and disposable income recover.
In 2022, the latest year for which data is available,
replacement and first time installation represented 71%
of steel panel radiator market volume in the UK, 61%
across mature Western European markets and 52% in
Eastern Europe and Turkey. New residential construction
remains the secondary volume driver, representing 35%
market volume in Europe, the UK and Turkey combined.
Despite the short-term effects of current macroeconomic
conditions, strong underlying demand for new homes
remains in many geographies, including the UK and Turkey.
Our opportunity
Stelrad continues to adapt quickly to evolving routes
to the replacement radiator market, having developed
a stronger retail and online channel presence in 2023,
both through organic growth and via the Radiators SpA
acquisition. This complements the Group’s historically
strong position with traditional trade distributors, where
Stelrad’s scale, strong brands, high levels of specification
and well-invested logistics operation position the Group
effectively to capitalise on future market recovery.
Closerelationships with new build residential housing
specifiers also position Stelrad effectively for longer-term
growth as conditions improve.
With changes both in legislation and in consumer
attitudes, the installation of lower temperature heating
systems will drive a trend in both new and existing
homes for larger, higher value hydronic radiators with
greater heat output. Electric heat emitter volume is
also likely to grow, as renewable energy sources deliver
lower cost electricity, with electricity prices becoming
increasingly decoupled from those of fossil fuels.
Our opportunity
Stelrad’s position as a trusted adviser to all kinds of
specifiers provides a clear opportunity for the Group to
engage and educate them, in order to influence the
selection of heat emitters appropriate for low and zero
carbon heating systems, whether hydronic or electric.
We continue to introduce compatible, sustainable, fully
recyclable heat emitters to our portfolio. In addition, we
are leveraging Stelrad’s market position in core countries
to maximise the potential of Radiators SpA’s electric,
hybrid and dual fuel radiators.
» Read more on page 14
» Read more on page 15» Read more on page 14
» Read more on page 15
Link to strategy Growing market share
Link to strategy Improving product mix
Link to strategy Optimising routes to market
Link to strategy Positioning effectively for decarbonisation
1
2
3
4
Annual Report 2023 Stelrad Group plc 11
Market trends
Stelrad’s resilient business model
generates sustainable long-term
value for our stakeholders
» Read more on page 27
ESG fit for the future
Brand strength
As the market-leading steel panel radiator brand across
the combined European, UK and Turkish markets, Stelrad
is at the heart of the Group’s powerful multibrand strategy.
Using Stelrad’s portfolio of strong brands enables the
Group to optimise channels to market and tomaximise
access to specifiers in all segments.
Product availability
Aiming to provide best-in-class lead times, Stelrad has
the largest radiator distribution centres in the UK and
mainland Europe, with respective capacities of 350k and
200k units, and our customers are further supported by
additional regional distribution hubs. As retailers and
trade distributors target reduced stockholding levels, this
provides Stelrad with significant competitive advantage.
Range innovation
Stelrad pioneered premium steel panel and vertical
steel panel radiators, offering a unique combination
of design aesthetic, ease of installation and value for
money, and achieved high levels of Western European
market penetration. With an innovative upselling
approach, the Group has a clear objective to expand
the under-developed UK market. With the acquisition
of Radiators SpA in 2022, Stelrad’s portfolio extended
to include electric, hybrid and dual fuel heat emitters
suitable for low and zero carbon heating systems.
Standardised core design
The Group’s core steel panel radiator design is used in all
standard and premium steel panel ranges produced in
the Çorlu, Mexborough and Nuth facilities. This ensures
high-quality levels at the lowest possible cost by enabling
production flexibility, cost efficiency and risk mitigation.
People
Stelrad has a lean organisation of 1,400 permanent
employees andthemost stable and experienced
management teamin the industry, with 18 years’
averageexperience.
International network
Benefiting from a manufacturing, distribution and
sales and marketing presence across the vast majority
of key global radiator markets, Stelrad endeavours to
provide exceptional technical, logistical and commercial
support for specifiers, distributors, retailers, installers
andconsumers.
Brands
Stelrad has a portfolio of strong, industry recognised
brands, each with long-established, loyal customers.
Stelrad is the number one steel panel radiator brand
acrossthe combined market for Europe, the UK and
Turkey. Henrad and Termo Teknik are leading, industry
recognised steel panel radiator brands, whilst the DL
Radiators brand is well established and technically
innovative across a range of heat emitter technologies.
Hudevad is a premium Danish design brand favoured
by specifiers in the profitable commercial and high-end
residential sectors.
Operational assets
Stelrad has a flexible, well-invested, efficient and low
cost Group operational platform, following our recent
five-year investment programme, which focused on
manufacturing automation and logistics infrastructure,
coupled with the acquisition of Radiators SpA’s
multiproduct manufacturing facility.
Helping to heat homes sustainably
Consistent with our core purpose, helping to heat
homes sustainably, Fit for the Future is Stelrad’s
sustainability framework. It sets out our approach
to delivering both our business strategy and our
sustainability commitments to stakeholders
and the environment. It reflects Stelrad’s
vision of the significant role we can play in the
transition to a low – and ultimately zero – carbon
heating industry.
Driving better environmental
performance
Stelrad recognises the urgent need to reduce
global emissions and manage resources efficiently.
We are committed to reducing our environmental
footprint, focusing on energy and material usage,
the lifecycle impact of our products and the
decarbonisation of heating. We will innovate,
introducing products as part of a coherent offer
for low and zero carbon heating systems. We will
understand and quantify our impacts, targeting
improvements as part of a long-term net zero
journey, optimising our packaging design and
reducing the environmental impact of the raw
materials we use.
What makes us differentOur resources
Stelrad Group plc Annual Report 202312
STRATEGIC REPORT
Our business model
ESG fit for the future
People
Our people are fundamental to delivering our strategy
and driving the future performance of the Group.
Weaim to be a responsible employer and a safe place
towork. Weoffer competitive pay, attractive benefits
andcontinuous investment in training.
Customers
Trusted relationships with our customers and high
standards of business conduct are critical to our Group’s
performance. We continuously seek to build and strengthen
these key relationships and conduct business with integrity
and in a professional manner.
Suppliers
Our suppliers are intrinsic to our business performance.
Maintaining a fully integrated supply chain ensures
security of supply and speed to market, driving both
quality and competitiveness, whilst gaining the support
of our suppliers as we undertake sustainability initiatives.
Investors
Helping investors understand our business model,
strategy and sustainability initiatives through providing
balanced and understandable information is key to
their engagement and motivation to support future
investment opportunities. This engagement is also
fundamental to fulfilling regulatory requirements.
Communities and the environment
Striving to make a positive impact in the communities
where it is based, Stelrad has clear ESG initiatives in
each of our main operational territories. We are aware
of the impact the Group has on the environment and
this is a critical part of our decision making and business
planning process.
Enabling an exceptional workforce
Our people are fundamental to the success of
our business and we are proud of our culture of
collaboration and teamwork at Stelrad. We are
passionate about providing a workplace fostering
an inclusive, encouraging environment where
everybody can thrive and contribute to the
Group’s future growth. We support all areas of
our workforce, with particular focus on employee
engagement, training and development, wellbeing
and diversity and inclusion. Outside of our business,
we invest in community initiatives tailored to local
needs across our different geographical sites.
Conducting business responsibly
Conducting business responsibly is the key
foundation in everything we do, underpinning all
of Stelrad’s activities. As well as the fundamental
principles of international labour standards and
human rights, we are guided by a strong business
culture and a clear set of values overseen by the
Board. Our strengths in corporate governance,
safety, supply chain management and labour
standards enable progress in all aspects of
sustainability and corporate strategy. Our
number one priority is to keep our employees
and contractors safe and healthy and we aim
forzeroharm across all our operations.
Driving better environmental performance is a core element
of Stelrad’s strategy. We innovate to provide an appropriate,
coherent heat emitter offer for low-temperature heating
regardless of heat source. We engage with our value
chain to minimise environmental impact, using our
position of influence to encourage positive behavioural
changes from heating system specifiers.
Shared valueHow we create value
Package
Design and
innovate
Recycle
and reuse
ManufactureDistribute
Source
Engage,
educate and
influence
Formulate
strategy
Annual Report 2023 Stelrad Group plc 13
Growing
market share
Links to risks
1
1 2 3 4 5 6 7 8 9
Strive for cost leadership
Now In addition to our position of scale as the leading
radiator manufacturer, Stelrad invested for cost leadership,
with a programme upgrading all manufacturing facilities,
including our low-cost Turkish operation.
Future We will leverage our cost-leading multisite
manufacturing platform for maximum profitable growth
as smaller, higher cost competitors exit the market.
Provide market-leading product availability
Now Standardised core product design across three
of our facilities ensures production planning flexibility.
Ourmarket-leading UK and European distribution
centres, supported by dedicated inventory in key
geographies, offer best-in-class logistics.
Future The Group will maximise the benefits of its
distribution centres, increasing availability for premium
steel panel and other design radiators to expand the
market for higher added-value ranges.
Selectively target share growth in key
geographic markets
Now Stelrad is market leader in seven countries, holding
a Top 3 position in nine more. In 2022, the acquisition of
Radiators SpA enabled further share gains, notably in
France and Germany.
Future We will further develop relationships with
established players in core geographies, adapting to
evolving routes to market and leveraging our strong
brands to build our presence in key countries.
Act as a market consolidator
Now Stelrad, perceived by customers as a long-term
player of scale, is a proven market consolidator.
Future For smaller competitors, challenging market
conditions will increase pressure on profitability, providing
opportunities for Stelrad to gain share organically through
business gains or competitor exits.
Improving
product mix
Links to risks
2
1 2 3 4 5 6
Accelerate upselling to premium steel
paneland design products
Now In 2023, Stelrad’s mix of higher added-value
design radiators was 14.9%, representing 2.4 percentage
points growth compared to the prior year and up
6.0 percentage points relative to 2021, driven by the
acquisition of Radiators SpA.
Future Stelrad is well positioned for profitable growth as
radiator markets across Europe recover from the impact
of current macroeconomic conditions. The underlying
positive trend for design products is anticipated to
accelerate mix improvement over the long term. We will
continue to leverage our brand strength and market
leadership position in our core countries to expand the
market for design radiators, notably in the UK, where
premium steel panel penetration is at low levels relative
to the European average.
Pursue complementary
acquisitionopportunities
Now Having acquired Radiators SpA in 2022 and Danish
premium design brand Hudevad in 2018, Stelrad has
developed a significantly stronger presence in higher
added-value radiator categories. The Group’s key focus
is on maximising sales of this more extensive design
portfolio through our well-established international
sales and distribution network, across all of Stelrad’s key
geographic markets.
Future At a manufacturer level, the design radiator
market is fragmented, with many small players.
Drivenbycost of living increases, the category has
experienced greater relative volume decline than
high-volume products such as standard steel panel
radiators. As a result, design radiator producers without
aposition of scale in high-volume radiator manufacturing
will face additional pressure on profitability. This may
provide Stelrad with options for potential acquisitions.
Stelrad’s strategy is driven
by four key objectives
Stelrad Group plc Annual Report 202314
STRATEGIC REPORT
Our strategy
Optimising
routes to market
Links to risks
3
1 2 3 4 5 6
Adapt quickly to channel evolution
Now Stelrad’s multibrand strategy has allowed the Group
to manage the evolving dynamics of market channel
evolution effectively. As a result, we continue to maintain
unrivalled access to all routes to market, including the
traditional trade distribution model, major DIY and retail
outlets including the Kingfisher Group and pure play
internet operators.
Future Stelrad will continue to maintain and develop
close customer relationships across our core geographies,
investing in our leading brands to maximise profitable
growth as routes to market evolve and the distribution
channel consolidates. Following the acquisition of
Radiators SpA, the Group will continue to develop sales
through leveraging improved access to DIY and other
retail channels.
Embrace digital transformation
Now In 2023, despite challenging market conditions,
the Group’s sales through UK online channels have
continued to increase and are strongly orientated
towards higher added-value design radiators. As new
products are introduced, we continue to invest in
Building Information Modelling (“BIM”) and specification
databases for building products, to ensure consulting
engineers and architects can easily access our technical
data and incorporate our heat radiators into their heating
system specifications.
Future Stelrad will continue to develop digital capability
and a strong online presence to reinforce and develop
awareness of our leading brands with all potential
specifiers and installers, regardless of their preferred
market channel.
Positioning effectively
for decarbonisation
Links to risks
4
1 3 4 6 8 9
Maximise sales of products compatible
withlow-temperature systems
Now In the heat emitter market, the full impact of
decarbonising heating systems will take decades to be
felt, due to long replacement cycles and a significant
installed base. Decarbonising heat sources is the primary
legislative focus across Europe, which is driving a
corresponding requirement for heat emitters compatible
with low-temperature systems. During 2023, Stelrad
continued to develop our higher output hydronic offer
and launched our first electric range into the UK market.
Future Stelrad’s emphasis will be on maximising sales
of Radiators SpA’s electric, hybrid and dual fuel ranges in
core markets and raising awareness of our higher heat
output hydronic heat emitters.
Develop products appropriate for
low-temperature and decarbonised systems
Now Stelrad is working in partnership with a key
supplier to introduce a UK radiator range featuring steel
manufactured using renewable energy, with significantly
lower embodied CO
2
emissions.
Future Continuing to leverage Radiators SpA’s
technological capability, notably in hybrid and electric
radiators, will enable Stelrad to provide heat emitters for
all decarbonised heat sources.
Leverage our market position to unlock
adjacent opportunities
Now As decarbonisation initiatives gain momentum,
Stelrad’s brand strength, channel access and operational
infrastructure position the Group effectively to play a
pivotal role in the development of European heating
distribution channels.
Future Further diversification into complementary
product areas relating to the long-term decarbonisation
of heating systems will be enabled by Stelrad’s strong,
trusted brands and leading access to routes to market.
» Read more in our associated strategy in action on page 18
Risk key
Business disruption
1
IT failure or cyber breach
5
Climate change
9
Customers
2
People and culture
6
Loss of competitive advantage
3
Health and safety
7
Supply chain risk
4
Political and
economicenvironment
8
Annual Report 2023 Stelrad Group plc 15
Growing
marketshare
According to 2022 data*, the latest available, Stelrad was #1
inthe European steel panel radiator market for the first time
in the Group’s history, having made further important gains
inmarket share and position.
Stelrad continues to outperform its peer group
In 2022, Stelrad’s share rose by 0.4 percentage points to
18.8%. In contrast, the Group’s three traditional European
competitors lost a combined 4.0 percentage points between
2021 and 2022, with exposure to the Russian market being a
notable contributing factor to this decline.
Number 1 in seven countries and Top 3
in nine more
Stelrad secured a Top 3 position in 16 countries, according to
2022’s latest available steel panel market data, gaining two #1
positions and two Top 3 positions relative to 2021. The Group
was a clear market leader in the UK, where share exceeded
50%, France, Belgium, the Netherlands, Ireland, Denmark
and Greece.
* Data source: BRG Building Solutions.
Strategy in action
Stelrad Group plc Annual Report 202316
STRATEGIC REPORT
In 2022, Stelrad’s positive share growth trend continued, with increased
penetration of our ten core geographic markets providing the Group
with a strong foundation for future growth as markets recover.
Trevor Harvey
Chief Executive Officer
Germany
#3
market position
In 2022, Stelrad’s 10.1% share of the
German market represented a
4.1percentage points gain relative to
the prior year, and this was the first year
in which Group share exceeded 10%.
Theacquisition of Radiators SpA was
the key driver for share growth in this
important European market, moving
the Group from #5 to #3 position.
Poland
#2
market position
Although Polish market volume in
2022 was significantly impacted by
theongoing conflict in Ukraine, Stelrad
had a positive year for share growth,
reaching 10.7% in total and exceeding
10% for the first time. A 1.6 percentage
points rise took the Group from #3 to
#2 position.
Sweden
#2
market position
In 2022, Stelrad’s share in Sweden
was 22.5%, firmly consolidating the
Group’s challenger position with a
2.7 percentage points gain relative to
2021, an increase of 15.6 percentage
points since 2020. This significant gain
was driven by business development
with leading European distributor
Saint-Gobain.
22.5% ↑ 2.7
2022
2021
22.5%
19.8%
10.7% ↑ 1.610.1% ↑ 4.1
20222022
20212021
10.7%10.1%
9.1%6.0%
2020
6.9%
20202020
8.7%6.0%
Europe, the UK and Turkey
#1
market position
In 2022, Stelrad’s share of the European
steel panel radiator market increased
by 0.4 percentage points relative
to the prior year and has risen by
2.1 percentage points since 2020.
Driven by both organic growth and
the acquisition of Radiators SpA,
the Group recorded its highest ever
marketshare of 18.8%.
Stelrad’s ten core countries
#1
market position
In its ten core geographic markets,
Stelrad increased 2022 share by 1.5
percentage points relative to the prior
year, achieving a total share of 26.5%.
This represented 3.9 percentage points’
growth since 2020 and demonstrates
the successful implementation of our
focused share growth strategy.
France
#1
market position
Stelrad now leads the French market,
having gained 4.2 percentage points,
share in 2022 versus the prior year.
Injust three years since 2020, the Group
has moved from #3 to #1 position and
has grown share by 10.8 percentage
points to reach 30.6%. In the process,
Stelrad has overtaken long-established
competitors. Growth has mainly been
driven by organic share gains through
traditional distribution channels.
30.6% ↑ 4.2
2022
2021
30.6%
26.4%
26.5% ↑ 1.518.8% ↑ 0.4
20222022
20212021
26.5%18.8%
25.0%18.4%
2020
19.8%
20202020
22.6%16.7%
Annual Report 2023 Stelrad Group plc 17
Positioning effectively
for decarbonisation
Now manufactured in our low-cost facility in Çorlu,
Turkey, as well as Nuth, Netherlands, Stelrad’s
vertical radiator portfolio is growing as market
demand increases for these space-efficient,
high-output heat emitters.
Vento is a hybrid radiator, combining Stelrad’s
standardised steel panel radiator design with
automatically controlled additional electrical
convection. Vento is available in both standard
and premium designs.
Sharing the same length and height dimensions,
K3 triple panel, triple convector radiators offer
around 38% higher heat output than a K2 double
panel, double convector radiator and around 140%
higher heat output than the single panel, single
convector equivalent.
Our first UK electrical radiator range launched in the
second half of 2023. Radiators SpA’s electric heat
emitter portfolio provided an innovative range of
heat emitters targeted at the small but growing UK
electrical radiator market. Electric Series leverages
Radiators SpA’s know-how and Stelrad’s strong
customer relationships to position the Group effectively
in a segment with decarbonisation growth potential.
In 2023, Stelrad launched an H900 range into
the UK market. Although little known in the UK,
900mm high steel panel radiators are widely
available in mainland Europe, offering over 36%
higher heat output than the equivalent 600mm
size, the UK’s most common height dimension.
In the first half of 2024, Stelrad will launch the first
UK radiator range featuring steel with 90% lower
embodied CO
2
emissions, produced in the UK
and certified through an independently verified
insetting scheme. Green Series also uses no
plastic in the outer packaging, further reducing its
environmental impact.
Strategy in action continued
Green Series
K3
H900
Electric Series
Vento
Vertical
Stelrad Group plc Annual Report 202318
STRATEGIC REPORT
Stelrad is innovating to meet growing
demand for low and zero carbon heating:
we continue to develop and expand our
portfolio, working with specifiers to support
the transition to low-temperature and,
ultimately, zero carbon heating systems.
Trevor Harvey
Chief Executive Officer
Annual Report 2023 Stelrad Group plc 19
Management considers
a variety of financial and
non-financial measures
when analysing the
Group’s performance,
and the Directors believe
that each of these
measures provides useful
information with respect
to the Group’s business
and operations. With the
exception of revenue,
these are alternative
performance measures.
(1)
Revenue
£308.2m
Adjusted operating profit
(1)
£29.3m
2022 2022
2023 2023
2021 2021
£308.2m £29.3m
£272.3m £33.2m
£316.3m £34.0m
Description
The Group generates revenue from three
operating segments: the UK & Ireland,
Europe, and Turkey & International.
Revenue arises from the sale of products
to consumers and represents the
gross invoiced sales less credit notes
and rebates.
Performance
Revenue declined by 2.6% mainly due to
a decrease in like-for-like sales volumes,
partially offset by the full year benefit of
the Radiators SpA acquisition and the
impact of selling price increases. Revenue
fell by 12.9% on a like-for-like basis.
Description
Adjusted operating profit is the
Group’s key profit measure to show
performance from operations.
Performance
Adjusted operating profit fell by 13.8%.
The reduction in adjusted operating
profit was mainly the result of a
reduction in sales volumes year on year
and an increase in depreciation in the
year – mainly a legacy of the IAS 29
revaluation of Turkish fixed assets and
the impact of a full year depreciation
charge for Radiators SpA. The impact
of lower volumes has been partially
offset by proactive price and cost
management initiatives.
Measuring and analysing
theGroup’s performance
Links to strategy Links to strategy1 12 23 34 4
Strategy key
Growing market share
Improving product mix
Optimising routes to market
Positioning effectively for
decarbonisation
1
2
3
4
Links to strategy
Adjusted EPS
(1)
13.62p
2023
2021
2022
2019
13.62p
16.92p
19.11p
Description
Adjusted EPS is the adjusted profit for
the year of the Group per share in issue.
Performance
Adjusted EPS fell in the period,
impacted by a reduction in adjusted
operating profit and increased interest
costs, partially offset by reduced
tax charges.
1 2 3 4
Links to strategy
Free cash flow
(1)
£17.8m
2023
2022
£17.8m
£12.7m
Description
Free cash flow shows the cash available
to make distributions toshareholders.
Performance
Despite a small decrease in EBITDA,
a higher tax spend and rising interest
costs, free cash flow improved in the
year due to proactive management of
working capital and a return to lower
levels of capex spend.
1 2 3 4
2020
2020
2020
2019
2019
2019
£196.6m
£15.7m
£15.6m
£208.6m
£0.6m 0.23p
£9.7m
2020
4.44p
2021
£10.9m
(1) The Group uses some alternative
performance measures to track and assess
the underlying performance of the business.
Alternative performance measures are
defined in the glossary of terms on page 21
and reconciled to the appropriate financial
statements line item in note 33. Note 33 also
outlines the limitations of using alternative
performance measures.
Stelrad Group plc Annual Report 202320
STRATEGIC REPORT
Key performance indicators
2022 2022
2023 2023
2021 2021
5,121k 289k
5,952k 346k
5,404k 304k
2020 2020
2019 2019
4,969k 300k
5,483k 282k
Total radiator
volumes sold
5,121k units
Total premium panel
radiatorvolumes sold
289k units
Description
The sales volumes of premium panel
radiators sold across all geographical
segments. Premium panel radiators
include vertical radiators and are
differentiated from standard steel
panel radiators by their higher margin
and design. Increasing premium
panel penetration will enhance the
profitability of the Group.
Performance
Premium panel volumes fell by 4.9%
due to a decline in overall volumes.
Premium panel penetration was in line
with 2022, supported by the full year
benefit of the acquisition of Radiators
SpA, where the proportion of premium
panel sales is higher.
Description
The sales volumes of radiators across
all geographical segments in the
reporting period.
Performance
Volumes decreased by 5.2% in the
year (like-for-like decline of 12.5%), with
markets continuing to decline due to
global macroeconomic uncertainty.
Glossary of terms
Adjusted cash flow from operations:
cash flow from operations before
exceptional items and the impact of
exceptional items on working capital.
Adjusted EPS: adjusted earnings per
share is calculated on adjusted profit
for the year divided by the weighted
average number of shares in issue.
Adjusted operating profit: operating
profit before exceptional items,
amortisation of customer relationships,
foreign exchange differences (until
31December 2022) and the impact
ofIAS 29 (until 31 December 2022).
Adjusted profit for the year: earnings
before exceptional items, amortisation
of customer relationships, foreign
exchange differences (until 31 December
2022), the impact of IAS 29 (until
31December 2022) and tax thereon.
Business capital employed: the sum
of property, plant and equipment,
technology and software costs, trade
and other receivables, inventories, other
current financial assets, provisions, net
employee defined benefit liabilities,
trade and other payables and other
current financial liabilities.
CAGR: compound annual growth rate.
Cash flow from operations: EBITDA,
less exceptional items, plus or minus
movements in operating working
capital, less share-based payment
expense, less net investments in
property, plant and equipment, less
technology and software costs, less
finance lease payments.
Cash flow from operations conversion:
calculated by dividing cash flow from
operations by adjusted operating profit.
Contribution: revenue from sale of the
Group’s products less any cost of direct
materials, variable distribution costs,
variable selling costs, direct labour costs
and other variable costs.
EBITDA: profit before interest, taxation,
depreciation, amortisation, exceptional
items, foreign exchange differences
(until 31 December 2022) and the impact
of IAS 29 (until 31December 2022).
Free cash flow: cash flow from
operations less tax paid less net
interest paid.
Return on capital employed: adjusted
operating profit as a percentage of
business capital employed.
RMI: repair, maintenance and
improvement activities.
Links to strategy
Contribution per radiator
£18.09
2023
2021
2022
£18.09
£13.74
£16.01
Description
The value of contribution generated
perradiator sold.
Performance
Contribution per radiator has increased
by 13.0% (16.5% like-for-like increase),
benefiting from the continued transfer
of production to lower cost facilities and
increased selling prices, partially offset
by the impact of inflationary price rises.
2 4
Links to strategy
Return on capital employed
(1)
25.5%
2023
2021
2022
25.5%
46.5%
27.3%
Description
Return on capital employed is adjusted
operating profit as a percentage of
business capital employed.
Performance
Return on capital employed reduced in
the year, primarily due to a 13.8% reduction
in adjusted operating profit, partially
offset by a 7.6% reduction in business
capital employed due to lower capital
expenditure and lower working capital.
1 2 3 4
Links to strategy Links to strategy1 23
2020
2019
£13.19
£11.16
2020
2019
21.0%
12.6%
Annual Report 2023 Stelrad Group plc 21
We are committed to engaging
our stakeholders in all aspects
of our strategic vision
The Board of Directors of Stelrad Group plc, both
individually and together, consider that they have acted
in good faith and in a way that would be most likely
to promote the long-term success of the Group and
Company for the benefit of its members as a whole
(having regard to the stakeholders and matters set out
ins172(1)(a–f) of the Act) when making decisions during
the year ended 31 December 2023.
The Board considers its key stakeholders to be its people,
customers, suppliers and investors, and also recognises
the importance of the communities and environment in
which the Group operates. The Board takes the views of
its stakeholders seriously in setting and implementing
the Group strategy and believes that good stakeholder
engagement is key to the long-term success of Stelrad
Group plc. Stakeholder considerations also form part of
any Board discussions which lead to decision making.
Each year the Group undertakes a detailed business
planning process, during which the Group sets out its
short and long-term plans and, as part of this process,
carefully assesses any consequences of these plans.
The main objective of the business planning process is
to define a direction that will most likely promote the
success of the Group for all stakeholders. The Board
will also, on an ad-hoc basis, consider other decisions,
both strategic and operational, and in doing so will ask
the Group to explore various alternatives and the likely
consequences of each.
The remainder of this section of the Annual Report sets
out how Stelrad Group plc and the Board have engaged
with key stakeholders. In addition to the information
provided here, the Group’s business model on pages
12 and 13 and the Group’s strategy on pages 14 and 15
outline how the Group engages with its stakeholders
and how the business creates value for each of them.
Furthermore, our ESG strategy and activity, which directly
or indirectly impact all of our stakeholders, are outlined in
the Sustainability Report on page 26.
As the Board of Directors, our intention is to behave
responsibly towards our stakeholders at all times
and treat them fairly, so that they all benefit from the
successful delivery of our plan.
» Read more in our Corporate Governance Report on page 57
Board discussion
• s172 considerations are taken into
account in the Board’s discussions,
including the long-term impacts
onthe Group, its stakeholders
andthe wider environment
• s172 is taken into account in the
Board’s decision making
• The Board satisfies itself that
information provided is sufficient,
accurate and comprehensive to
enable decision making, and further
information is requested if required
• The Executive Management
team provides information on a
timely basis and further assurance
where required
Board information
• Board training and induction,
including s172 training
• Board papers including financial
andnon-financial information
• Advice and presentations by internal
and external experts
• Board engagement with
keystakeholders
Board review
• The Board is provided with
information on outcomes and
actions of its decisions
Board decision
• Actions are taken to implement
theBoard’s decisions
Decision making by the Board Section 172 statement
2
1
3
4
Stelrad Group plc Annual Report 202322
STRATEGIC REPORT
Stakeholder engagement
People
Why we engage
Our people are fundamental to delivering our
strategy and driving the future performance of the
Group. We aim to be a responsible employer and an
attractive place to work. We offer competitive pay,
attractive benefits and continuous investment in
training. The views of our people are an important
input in the ongoing development of the training,
benefits and working environment we provide.
The health, safety and wellbeing of our people is a
primary consideration in the way we do business
and is a critical part of our decision making process.
As a key element of our engagement with our
people, we seek to maintain strong collaborative
relationships with our trade unions and employee
representatives. Through a combination of these
relationships, periodic employee surveys and
ongoing communication with our people, we
believe that our employee engagement approach
is effective and appropriate for the Group.
The Board as a whole shares responsibility for
ensuring that employee engagement is sufficiently
robust and regularly appraises the appropriateness
of the approach and the need for alternative
methods of engagement.
How we engage
• Regular access to and provision of training and development
• Individual performance reviews
• Recognition and reward
• Regular communications including newsletters
• Annual Report
• Employee surveys
• Board member visits to sites
• Code of Conduct
• Equality, Diversity and Inclusion Policy
Outcomes
• Communication of relevant and timely information
andsharing of knowledge
• Improved level of engagement, lower absence rates
andhigher retention rates
• Development and improvement of skills throughout
theworkforce
• Improved awareness and support for health and
wellbeing issues
• Processes improved, initiatives developed and
management buy-in at all different levels – facilitated
bythe Group’s Code of Conduct
• High standards of health and safety
performancemaintained
» Read more about our workforce in our Sustainability Report on page
33 and succession planning within the Nomination Committee Report
on page 71
People Customers Suppliers Investors Communities and
the environment
Our stakeholders
Annual Report 2023 Stelrad Group plc 23
Customers
Suppliers
Why we engage
Trusted relationships with our customers and
high standards of business conduct are critical to
our Group’s performance. We continuously seek
to build and strengthen these key relationships
and conduct business with integrity and in a
professional manner.
How we engage
• Management of ongoing customer relationships
• Customer events and product launches
• Participation in industry forums, exhibitions and events
• Brand websites and social media
• Annual Report
• Supporting customers with design of low-temperature
heating systems
• Proactive and high-quality customer service
Outcomes
• Continued customer satisfaction and loyalty
• Establishment of long-term partnerships
• Successful and mutually beneficial product development
as we transition to zero carbon heating systems
» Read more about how we are positioning effectively for decarbonisation
through our product range on page 18
Why we engage
Our suppliers are intrinsic to the performance of
our business. Maintaining a fully integrated supply
chain means that we can ensure security of supply
and speed to market, in addition to achieving a
high-quality, competitive supply, whilst gaining
the support of our suppliers as we undertake
sustainability initiatives.
How we engage
• Ongoing supplier performance and relationship
building meetings
• Supplier reviews and audits
• Partnering with key suppliers to develop initiatives
forinnovative solutions in a collaborative manner
• Collaboration as appropriate on product development
• Effective communication of quality, cost competitiveness
and future order requirements
• Timely payment of suppliers
• Annual Report
Outcomes
• Stable sourcing, product quality and competitive pricing
• Long-term partnering, reducing supply chain volatility
• Fair payment terms
• Support of our ESG initiatives
» Read more in our spotlight on steel purchasing on page 30 and our
spotlight on partnerships on page 31
Stelrad Group plc Annual Report 202324
STRATEGIC REPORT
Stakeholder engagement continued
Communities and the environment
Investors
Why we engage
The Group’s ESG strategy is key to ensuring our
ESG ambitions are realised. In 2023 ESG was a
significant area of focus for the Board and will
remain so going forward. The Group has clear ESG
initiatives in each of the main territories in which it
operates, all of which strive to enable the Group to
make a positive impact in the communities where
it is based. The Group is aware of the impact it has
on the environment and this is a critical part of our
decision making and business planning process.
How we engage
• Community investment initiatives
• Sponsorship and employee volunteering
• Contributing to development of local, regional and
national initiatives
• Regular engagement with local authorities and businesses
to identify and support the delivery of educational and
vocational initiatives
• Participation in initiatives to help reduce the
environmental impact of our business
• Supporting customers with design of low-temperature
heating systems
• Sustainability steering group and sustainability
working group
Outcomes
• Support and development of local educational institutions
• Longstanding sponsorship of local sport clubs, regular
charitable events and fundraising
• Cleaner and friendlier areas for the local communities
• Successful product development as we transition to zero
carbon heating systems
» Read more about our environmental performance in our Sustainability
Report on page 29
Why we engage
We consider that helping our investors to
understand our business model, strategy and
sustainability initiatives is key to ensuring that
they are engaged in the business and motivated
to support future investment opportunities that
may arise. Continued investor engagement is also
fundamental to fulfilling regulatory requirements
and to providing fair, balanced and understandable
information about the business to enable informed
investment decisions to be made.
How we engage
• Annual Report
• Annual General Meeting
• Corporate website including dedicated investor section
• Results presentations and post-results engagement
withshareholders
• Regular investor roadshows, comprising both one-to-one
meetings with our largest institutional shareholders and
investor group meetings taking place following results
announcements
• Regular in-depth feedback on investor views provided
byour corporate brokers
• Expansion of analyst coverage as a further way of
communicating to investors
Outcomes
• Maximising demand for the Group’s shares
• Support for investment opportunities including potential
acquisitions or capital investment programmes
Annual Report 2023 Stelrad Group plc 25
Reporting clear
progressinsustainability
2023 was our first full year operating Fit for the Future,
thestrategic sustainability programme we developed in
2022. Sustainability is central to achieving our core purpose,
and I am delighted with the progress we have made since
establishing key governance structures and the metrics
needed to drive Stelrad’s future progress in this area.
We calculated Scope 3 emissions at Group level for the first
time last year (see page 32) and set a carbon intensity target
for the future. Achieving that target as markets recover and
production volumes increase will require us to minimise
increases in our operational carbon emissions through
reducing the impact of the steel we purchase, investing
inourmanufacturing processes and using more renewable
energy. In 2023, we made progress towards this objective
by increasing the percentage of energy use from renewable
sources, from 8.7% in 2021 to 41.5% in 2023.
We developed additional sustainability-related policies to
strengthen our approach in key areas (see page56) andwe
will continue to develop these further over the coming years.
A good example is the expansion ofour supplier auditing
process across all of Stelrad’s business units. Thisensures
a consistent approach and comparable standards across
the Group.
We are also enabling our customers to make
sustainable choices.
We published our first environmental product declarations
detailing the environmental impact of our products. This
was developed in response to customer requests and
reflects our determination to promote sustainability and
increase customer satisfaction by working in partnership
withstakeholders throughout our value chain.
In 2024, we will be launching a low-carbon radiator range in
the UK, enabling Stelrad’s customers to reduce the carbon
impact of the products they buy, whilst contributing to the
decarbonisation of our supply chain and the mitigation of
climate change more widely.
Within Stelrad’s operational facilities, we made good progress
on safety in 2023 with reductions in all key metrics, notably
a 15% reduction in lost time severity rate and a 7% reduction
in all safety incidents. This is especially pleasing, as it took
place in the year when we integrated Radiators SpAinto
our Group safety processes and identified important
opportunities for future improvement. Safety will continue to
be a key focus for 2024 as we strive for zero harm, prioritising
further improvements to foster a safe and supportive
workingenvironment.
After making clear progress last year, we remain committed
to maintaining momentum throughout 2024 and beyond,
building on the foundational improvements we have
established and ensuring we fulfil our core purpose,
helpingto heat homes sustainably.
Trevor Harvey
Chief Executive Officer
8 March 2024
Highlights of 2023
• Expansion of Scope 3 carbon emissions measurement
from the UK to cover the whole Group (see page 32).
• Incorporation of Radiators SpA into our expanded set
of sustainability metrics, and development of Group
sustainability targets (seepage 28).
• Development of Group policies covering sustainable
procurement, the environment, information security
and anti-corruption and bribery (see page 56).
• Verification and publication of our first Environmental
Product Declarations (“EPDs”) (see page 29).
• Reduction in lost time severity rate of 15% towards our
long-term goal of zero harm (see page 35).
Next steps for 2024
• Further development of metrics and targets, in line
with international frameworks.
• Development of an action plan for packaging
changes, aiming to drive improvement on our key
packaging metrics.
• Launch of a low-carbon radiator series in the UK,
utilising low-carbon steel.
• Further measurement of lifecycle impacts, leading
toadditional EPDs.
Trevor Harvey
Chief Executive Officer
OUR CORE PURPOSE
Helping to heat
homessustainably
UNDERPINNING FOUNDATIONS
Conducting business
responsibly
STRATEGIC PILLAR
Driving better
environmental
performance
STRATEGIC PILLAR
Enabling an
exceptional
workforce
Stelrad Group plc Annual Report 202326
STRATEGIC REPORT
Sustainability Report
Our Fit for the Future framework covers a variety of strategic issues as shown in the table below. These were
determined through an in-depth consultation process with a wide range of the Group’s key stakeholders.
Thesewere then further developed to ensure the framework matches the structure, capabilities and processes
ofthe Group.
Driving better environmental performance
1
Decarbonisation of heating
Description – Reducing the amount of carbon
produced by domestic and commercial
heating systems
Objective – Ensure we maintain a coherent offering
suitable for lower carbon heating systems, regardless
of the heat source
2
Energy and carbon
Description – Managing business activities that
consume energy and emit greenhouse gases into
theatmosphere, contributing to climate change
Objective – Target improvements as part of a
long-term journey to net zero carbon emissions,
withinour operations and our wider value chain
3
Upstream lifecycle impacts
Description – Managing the environmental impact
ofa product in the extraction, processing and
distribution of raw materials
Objective – Understand and quantify our indirect
impacts, and engage elements of our value chain to
minimise these impacts
4
Packaging
Description – Managing the lifecycle environmental
impacts of the packaging used to protect products
during transportation
Objective – Develop an approach to packaging
products that is fit for the future, environmentally
andcommercially
Enabling an exceptional workforce
5
Training and development
Description – Developing the skills needed to
maintain and enhance our market position
Objective – Review and strengthen existing training
and development programmes
6
Diversity and inclusion
Description – Enhancing the presence of differences
such as gender or ethnicity within the workplace, and
ensuring that all people share a sense of belonging
Objective – Be representative of the communities
inwhich we operate and broaden the diversity of
ourpopulation
7
Employee engagement
Description – Understanding the motivations of
employees and working to foster an engaged workforce
Objective – Develop employee engagement
programmes with ongoing two-way communication
8
Employee wellbeing
Description – Supporting employees’ mental,
emotional and physical health
Objective – Provide and foster a safe and
supportive working environment that promotes
personal wellbeing
Conducting business responsibly
9
Health and safety
Description – Protecting the health and safety of
theworkforce during all business-related activities
Objective – Aim for continuous improvement in
accident frequency rates by nurturing a positive safety
culture throughout the business
10
Supply chain management
Description – Identifying and managing issues within
the supply chain, and promoting the improvement
of standards
Objective – Engage with suppliers to optimise
sustainability in our supply chain
11
Corporate governance and ethics
Description – Ensuring the system of rules
andprocesses fosters ethical business practices
andsupports the needs of all stakeholders
Objective – Maintain high ethical and corporate
governance standards and a culture of accountability
Annual Report 2023 Stelrad Group plc 27
Sustainability metrics
We present here our key sustainability metrics, with further
metrics shown on page40. We have added metrics for
Scope3 carbon emissions and the recycled content of
packaging materials this year. These additional metrics reflect
historical focus areas where we have improved our data
collection.
The inclusion of data from Radiators SpA led to historical
recalculation to provide a consistent baseline for comparison.
Where 2021 data for Radiators SpA isunavailable, this is
shown as “n/a”. Intensity metrics were also affected by a
change in methodology to ensure greater consistency.
In 2023, further reductions in our Scope 1 and 2 carbon
emissions were achieved and these are now 63% lower than
the 2021 baseline, although a market-driven production
volume reduction was a clear contributory factor. Our main
underlying improvement was driven by the increased use
of renewable energy, which rose to 41.5%. This contributed
to an emissions intensity figure that is now 42% below the
2021 baseline. Scope 3 emission reductions of 16% were also
achieved, driven by a reduction in purchased goods.
On packaging, our use of recycled content increased
significantly, driven by the shrink film used in Termo Teknik.
Unfortunately, we used more plastic per tonne of product due
to changes in the mix of products and production locations,
and an increase in transitdistance.
Metric 2023 2022 2021
Driving better
environmental
performance
Total market-based Scope 1
and 2 emissions (tCO
2
e) 12,122 14,827 32,757
Market-based Scope 1 and 2
emissions intensity (tCO
2
e/t) 0.10 0.11 0.18
Total Scope 3 emissions
(tCO
2
e) 445,479 531,456 n/a
Energy from renewable
sources (%) 41.5% 39.5% 8.7%
Plastic packaging intensity
(kg/t) 12.1 11.4 n/a
Recycled content of
packaging material used(%) 68.1% 60.5% n/a
Enabling an
exceptional workforce
Training days per employee 2.9 2.6 n/a
Voluntary labour turnover
rate 8.0% 7.3% n/a
% of women in workforce 10.5% 11.1% n/a
Conducting business
responsibly
Lost time frequency rate
(1)
8.82 9.19 10.94
Lost time severity rate
(1)
54.06 63.45 49.27
% of key suppliers with
up-to-date audits 64.3% 19.7% n/a
(1) Any incident resulting in an employee not being able to attend work the
following day is regarded as a lost time incident.
Definitions of these key metrics are available on page 37.
We managed to increase our training days per employee
from the high level seen in 2022 and also kept our voluntary
labour turnover at similar levels.
The percentage of women in the workforce also declined
(seepage 34 for more detail).
We saw improvements in our key safety metrics, reflecting
our ongoing focus in this area (see page 35 for more detail).
Following development during 2022, our enhanced supplier
auditing process is now embedded across the Group. 64% of
suppliers have been audited, ahead of the initial target of 55%
– demonstrating significant buy-in from our suppliers.
Sustainability targets
The following table outlines our ambitions for a selection of
our key sustainability metrics.
Metric Ambition
Market-based Scope 1 and 2
emissions intensity (tCO
2
e/t)
45% reduction from
2021 by 2030
Energy from renewable
sources (%) 45% by 2030
% of key suppliers with
up-to-date audits Above 75% by 2030
Our carbon reduction target focuses on achieving a
45% intensity reduction from the 2021 baseline by 2030.
Wecontinue to monitor emissions and, longer term, we aim
to set an absolute reduction target aligned with science.
Conscious of the market-driven reduction in production
volume, we do not feel that is appropriate at this point.
Increasing the share of renewable energy in our mix will be a
key enabler to further carbon reductions. Our target of 45% by
2030 is reflective of the significant increases we have already
made, and the relative difficulty of further increases.
Finally, we aim to maintain a position where at least 75% of
key suppliers have been audited within agreed timescales.
Each of these targets will be kept under review.
In addition to the above, we aim to maintain a performance
above important thresholds on a further selection of our
key metrics, including the recycled content of packaging,
voluntary labour turnover and training days per employee.
Two of these metrics have been included in our executive
remuneration scheme for 2024 (see page 75).
Our focus for improving safety and women’s representation
will be strengthening our culture and processes, developing
targeted initiatives to encourage female representation and
progressing towards doing zero harm.
There is significant ongoing work on understanding the
potential impact of any changes to our packaging. As these
initiatives progress, we will look to set long-term targets.
Stelrad Group plc Annual Report 202328
STRATEGIC REPORT
Sustainability Report continued
Driving better
environmentalperformance
Our approach to driving better environmental performance
focuses on a number of areas, including our energy and
materials usage, the impact of our products over their
lifecycle and the decarbonisation of heating.
In 2023, our understanding of our environmental impacts
increased further, with the completion of additional
lifecycle assessments (“LCAs”), the publication of our first
environmental product declarations (“EPDs”), and the
collection of Group-level Scope 3 carbon emissions data.
This helps us to identify targeted actions to improve our
environmental performance across all stages of our business
model, as we outline below.
We also published our first EPDs, covering standard panel
radiators in Europe and Scandinavia. These were published
to ensure that we provide full information to our customers,
enabling them to easily assess the environmental impact of
our products on their projects. The EPDs reinforce the finding
from our Scope 3 analysis that the greatest impact comes
from our raw materials, with c.80% of the carbon footprint
of our radiators attributable to module A1–rawmaterials.
The studies also emphasise the benefit of the recovery and
recycling of steel at the end of life of the radiator, which
significantly reduces the full lifecycle impact of our products
– benefits that would not be possible if alternative, harder to
recycle materials were used.
2. Design and innovate
We are always looking to bring innovative products to market,
and we believe that innovation is key to our business. This is
especially important as we develop our higher heat output
product portfolio, prioritising products that are particularly
suited to the heating systems of the future.
This year saw two significant developments to our product
offering. Firstly, we utilised the capabilities of Radiators
SpA to expand our offering of electric radiators in new
markets including the UK. These products can contribute
to the elimination of fossil fuel-using heating systems, and
we expect sales of these products to increase over the
coming years.
The second development was the launch of the Green Series
in the UK. This series has been developed in partnership
with a key steel supply partner and uses steel certified
to be responsible for 90% lower carbon emissions than
standard. Our engagement with this scheme offers us and
our customers the opportunity to directly contribute to
decarbonising the steel industry by funding carbon reduction
projects. The Green Series will beavailable for purchase from
April 2024.
3. Source
The results from our existing LCAs and our Scope 3 emissions
measurement emphasise the importance of the materials
that we use, and how we conduct our sourcing processes.
Weregularly audit our key suppliers, aiming to raise
standards across the supply chain. To further strengthen our
procurement activities, in 2023 we developed a sustainable
procurement policy. This policy applies to all employees
within the Group and aims for our procurement activities
to result in the best combination of whole-life costs and
benefits by considering appropriate environmental, social
and economic factors in all purchasing decisions. Thepolicy
outlines our procurement principles and details our
objectives in the areas of human rights, labour standards,
environment, energy and carbon, materials and resources.
Our sustainable procurement objectives include proactively
tackling modern slavery and labour exploitation, protecting
nature, reducing the energy use in our supply chain,
increasing the use of low and zero emission transport
methods, seeking reductions in materials consumption,
reducing usage of single-use plastic, and increasing the use
of clauses in procurement contracts that encourage positive
environmental or social outcomes.
Steel makes up c.96% of the weight of our products, and
our steel sourcing activities are key. The spotlight on steel
purchasing shows some of the methods we are taking to
increase sustainability in this area.
Package
Design and
innovate
Recycle
and reuse
ManufactureDistribute
Source
Engage,
educate and
influence
Formulate
strategy
1. Formulate strategy
Environmental considerations feature strongly in our strategy.
Our key objectives are outlined on page 14 and are closely
aligned to environmental factors. The strategic importance of
the environment reinforces the need to properly understand
our impacts. In 2023 we took important steps to increase
our understanding by calculating our Group-wide Scope 3
emissions for the firsttime and publishing our first EPDs.
Our Scope 3 emissions analysis has confirmed the significant
impact of raw materials. Purchased goods and services
account for 91% of the total carbon emissions of our value
chain with the biggest contribution from steel and steel
components. More information on our approach to sourcing
steel is described on page 30. Other major contributors to
our overall carbon footprint include our use of energy in
our operations and the transportation of products and raw
materials. Thefollowing sections outline some examples of
how we are working to reduce our environmental footprint
in these areas. Moreinformation on our Scope 3 emissions
is shown on page 32 and is also published in our carbon
balance sheet on our corporate website.
Annual Report 2023 Stelrad Group plc 29
4. Manufacture
The environmental impact of our manufacturing is relatively
small in comparison to other elements of the supply chain,
but it is still an area of focus, and one where we have
greatercontrol. We measure our carbon impact through
our two key sustainability metrics of Scope 1 and 2 carbon
emissions and emissions intensity. Since our baseline in
2021, both of these metrics significantly reduced. Emissions
intensity has reduced by 42%, driven primarily by increasing
the amount of renewable energy purchased and by efforts
to reduce energy usage and increase energy efficiency.
Grossemissions reduced even further, by 63%, due to
market-driven reductions in production volumes. Anyfuture
recovery in market conditions may increase absolute emissions.
We have focused on reducing Scope3 emissions in the areas
in which we have the greatest influence, including employee
commuting. In 2023, we completed a number of initiatives
designed to encourage more environmentally friendly
commuting. These include investments at Continental
Radiators to install eight electric car charging points, and to
improve site access for bicycles, as well as the implementation
of a cycle to work scheme in the UK. This is in addition to our
ongoing provision of buses for employees in Turkey. These
actions should reduce the number of internal combustion
cars visiting our sites.
Beyond energy and carbon, our water usage reduced by 7.1%
from 2022. The amount of waste we generated fell 13.1% to
7,547 tonnes, and we continue to divert virtually all waste from
landfill, achieving 97.7% in 2023. In 2024, we intend to increase
the detail of the mapping of our waste streams, improving
our understanding of the types of waste generated and how
it isprocessed.
Spotlight on steel purchasing
We proactively engage with our key steel suppliers
to understand their decarbonisation plans, given
the environmental impact of the steel supply
and the significance of steel to Stelrad’s products.
Alongsidetracking their progress, we encourage our key
steel suppliers to accelerate their decarbonisation plans,
and we plan to increase our work with steel partners on
investigating options for lower-carbon steel. The launch
of the Green Series in the UK is a good example of how
this can contribute to our offering whilst increasing
investment inthe decarbonisation of the steel industry.
The full decarbonisation of the steel supply chain is a
long-term process. In the short term, we are actively
reducing the impact of the steel we buy. This includes
promoting greater efficiency in materials usage and
using lower gauge steel. In 2023, 17.8%, or 19.6kt, of
our steel purchases were classified as lower gauge,
an increase from 16.3% in 2022. This growth is partially
attributable to increased purchasing in the UK and
changes made in Radiators SpA in 2023 to reduce the
steel gauge used on our column products by 5.5%.
Driving better environmental performance continued
Stelrad Group plc Annual Report 202330
STRATEGIC REPORT
Sustainability Report continued
Spotlight on energy usage
A key method to decarbonise operations is to reduce
the use of fossil fuels. Improving efficiency in our
manufacturing operations, supported by significant
investment, continues to be a key focus for us, including
adapting existing processes to run on electricity rather
than fossil fuels. One example of this took place in
Italy in 2023, where the heat shrink oven was replaced
with an electric version. This machine was used in
packaging our products and consumed approximately
13,600m
3
of natural gas each year. It is estimated that
the replacement will reduce energy consumption by
124MWh each year – c.1% of the site’s total natural gas
usage in 2023. Afurther example is in the UK, where
our LPG-consuming forklift trucks will be replaced with
electric versions in 2024.
The impact of such initiatives is shown by the increase
in the proportion of energy derived from electricity. In
2021, this was 48%, and this has increased to 52% in 2023.
Thereduction in our carbon impact from using electricity
rather than fossil fuels is increased when we utilise renewable
electricity. We are targeting 45% of our energy use from
such sources by 2030.
5. Package
Packaging is an essential part of our offering, as our products
are heavy and bulky and can be damaged if packaged
incorrectly. Over the last two years we engaged in a significant
project to understand the packaging we use and identify
opportunities to reduce its environmental impact without
compromising the quality of protection. This is supported
by two key sustainability metrics, measuring the recycled
content of packaging that we use and the intensity of plastic
used in our packaging.
Our improved packaging data helps us to identify key areas
of focus and any potential for sharing best practice. Our use of
packaging is greatest in Termo Teknik to ensure that products
are not damaged when shipping from Turkey. This includes
using materials such as polystyrene and bubble wrap, which
are harder to recycle and have a greater environmental
impact. This partly explains the increase in plastic packaging
intensity seen in 2023, with a greater proportion of products
manufactured in Turkey.
Although there are definite possibilities for improvement,
there are many positive aspects of our packaging use. 94% of
our cardboard and paper and 16% of our plastic is made from
100% recycled material, and 94% of our packaging is, in turn,
recyclable. Our key sustainability metric measuring recycled
content increased to 68.1%, driven by changes to plastics used
for bags, bubble wrap and shrink film.
We have also identified a number of actions to improve
performance against these metrics in future, including
removing plastic bags from some of our hardware packs,
reducing the gauge of shrink wrap and polystyrene used
on some products and altering the grade of plastics used
to increase recyclability. Some of these improvements are
already in place; others will be delivered in the near future.
In 2023, we used 2,998 tonnes of packaging material, down
9.5% from 2022 due to reduced production volumes. This is
broken down by material type as shown below:
Packaging used (2023), by material type
2,998t
(2022: 3,315t)
Plastic 48.1%
Cardboard/paper 51.9%
6. Distribute
Our distribution activities deliver products from our six
manufacturing and warehousing facilities to c.40 different
countries. Increased efficiency is a key aim, and we are flexible
in our approach to ensure we maximise vehicle utilisation
rates, deliver in full pallet loads where possible and minimise
the cost and energy involved. Final distribution to customers
is routinely managed with route optimisation software.
We also promote the efficient use of hauliers through back-
haul arrangements wherever suitable. We have specific
arrangements with major customers to reduce empty
running of vehicles and increase optimisation. Additionally,
our use of third party hauliers further increases flexibility
and the potential for back loads. We are also addressing
the carbon impact of our own car fleet and aim for all
vehicles across the Group to emit less than 50g CO
2
e per km.
Currently, 45% of cars in the Group meet this standard with a
significant increase in low-emission vehicles used in Europe
compared to 2022.
7. Engage, educate and influence
To continue to contribute to the decarbonisation of heating,
we educate and inform our customers and other value chain
participants. We engage in communication campaigns
explaining how radiators can be used in a variety of scenarios
and with a range of heat sources.
Achieving our goals is made easier through developing
partnerships with key influencers, and we are strengthening
our industry involvement, for example, with trade
associations. A key activity for us is the design of heating
systems and the spotlight on partnerships below outlines
how we have approached this in our key UK market.
Spotlight on partnerships
Over the years, we have formed a variety of different
partnerships with agencies, heat source manufacturers
and other value chain participants. The objective of these
was twofold – the production of more accurate and
efficient heating designs, enabled through better data
sharing, and, secondly, the improved generation of leads
and additional business for Stelrad.
In response to the growth of alternative heating
systems such as heat pumps, we further increased our
engagement with this market, in part by forming a
partnership with Renewable Energy Domestic Designs
(“REDD”). REDD provides a heating and plumbing design
service to a variety of sectors, with a focus on the new
build housing sector. It is also involved in designing the
heating systems of the future, including contributing to
the Energy House 2.0 facility at the University of Salford.
REDD now handles c.50% of the queries we receive for
heating systems, with a large proportion of those designs
incorporating alternative heat sources to gas boilers.
8. Recycle and reuse
It is estimated that the lifecycle of our radiators is in excess
of 30 years. Steel is 100% recyclable and benefits from one of
the highest recycling rates of all materials. The benefit of this
recyclability is quantified in our EPD, where benefits from
recycling at the end of life equate to c.52% of the carbon
footprint of the initial product.
We are also working to improve the circularity of the
packaging we use. We aim to both improve the recyclability
of our packaging, primarily by replacing hard to recycle
plastics with alternatives such as cardboard, and increase the
recycled content of the packaging we use – this is monitored
as part of our key sustainability metrics. In 2023 we increased
the recycled content of our packaging from 60.5% to 68.1%.
Annual Report 2023 Stelrad Group plc 31
Driving better environmental performance continued
Streamlined Energy and Carbon Reporting
The table below summarises our energy usage and associated emissions for the Group during 2023.
Our chosen intensity metric is tCO
2
e per tonne of product produced. The results of this intensity metric are as follows,
showing the change relative to our baseline year of 2021:
Scope 1 and 2 intensity 2023 2022 2021
Baseline
variance
Market-based 0.10 0.11 0.18 (42.4)%
Location-based 0.18 0.20 0.17 5.8%
2023 2022
UK Non-UK Total UK Non-UK Total
YoY
variance
Consumption
(MWh)
Scope 1 6,539 36,506 43,045 7,359 44,631 51,990 (17.2) %
Scope 2 6,349 39,399 45,749 6,899 45,653 52,552 (12.9)%
Total 12,889 75,905 88,794 14,258 90,284 104,542 (15.1)%
Tonnes of carbon dioxide equivalent (tCO₂e)
2023 2022
UK Non-UK Total UK Non-UK Total
YoY
variance
Scope 1 1,234.6 6,838.3 8,072.9 1, 377. 8 8,282.3 9,660.1 (16.4)%
Scope 2 Market-based 3.1 4,046.3 4,049.3 0.5 5,166.2 5,166.7 (21.6)%
Location-based 1,314.8 12,613.4 13,928.2 1,334.1 15,707. 3 17,041.4 (18.3)%
Total Scope 1
and 2
Market-based 1,237.7 10,884.5 12,122.2 1,378.4 13,448.5 14,826.8 (18.2)%
Location-based 2,549.4 19,451.7 22,001.1 2,711.9 23,989.6 26,701.5 (17.6) %
Scope 3 category 1 88,114 336,999 425,113 52,572 447,425 499,997 (15.0)%
Scope 3 category 4 1,103 7,625 8,728 2,474 11,789 14,263 (38.8)%
Other Scope 3
emissions 1,978 9,660 11,638 1,962 15,234 17,196 (32.3)%
Total gross Scope 3
emissions 91,195 354,284 445,479 57,0 08 474,448 531,456 (16.2)%
Total Scope 1, 2
and 3 emissions
Market-based 92,433 365,168 457,601 58,386 487,897 546,283 (16.2)%
Location-based 93,744 373,736 467,480 59,720 498,438 558,157 (16.2)%
Reporting methodology
Our emissions are reported on a consolidation, operational control approach, as defined by the GHG Protocol. All emissions
have been calculated following the GHG Protocol’s Corporate Accounting and Reporting Standard. All seven greenhouse gases
defined by the Kyoto Protocol have been accounted for and reported on a tonnes of carbon dioxide equivalent (tCO
2
e) basis.
Where available, country-specific emissions factors have been utilised for our global operational emissions. Residual emissions
factors have also been used for non-renewable energy reported under market-based calculations and, where possible, these
have been sourced for our countries of operation.
Purchased goods and services account for 90.9% of Stelrad’s total location-based emissions. Other significant emissions
categories include upstream transportation and distribution (1.9%), fuel-related emissions (0.9%) and end-of-life treatment of
sold products (0.7%). All other categories are either not applicable, or account for 0.5% or less of Scope 3 emissions.
Indirect use of energy by sold products is optional to report in category 11. This would include the indirect energy use of boilers,
which, if included, would represent more than 99% of total emissions. This is therefore not included in our inventory. More
details can be found in our Carbon Balance Sheet Report, published on our website at stelradplc.com/sustainability/driving-
better-environmental-performance/.
Stelrad Group plc Annual Report 202332
STRATEGIC REPORT
Sustainability Report continued
Enabling an exceptional workforce
Our people are fundamental to the success of our business,
and we are proud of our culture of collaboration and
teamwork. We are passionate about providing a workplace
that fosters an encouraging and inclusive environment where
everybody can thrive and contribute to our future growth. We
support all areas of our workforce, with particular focus in the
areas of employee engagement, training and development,
wellbeing and equality, diversity and inclusion. Outside of
our business, we invest in community initiatives tailored to
local needs across our different geographical sites. To help us
monitor our progress, we report our key sustainability metrics
of training days, voluntary labour turnover and women in the
workforce on page 28.
Our people
Our geographical footprint is shown on page 3. Across the
Group, we employ a total of 1,414 people, with 1,206 of those
outside the UK. Given this geographic span, we have a
diversity of cultural norms as well as a breadth of differing
statutory requirements. Our culture, with its emphasis
on respect, integrity, service, stewardship and excellence,
bridges and values the rich heritage of our people and the
diversity we have within our business. Our strategy of local-led
implementation ensures we are delivering for our employees
in each country and our flat management structure assists us
in maintaining close working relationships across the Group.
Training and development
We have a highly skilled and experienced workforce with a
deep understanding of our industry. Our people are at the
heart of everything we do. We offer a wide range of training
and development opportunities that are relevant to our
industry because we know that our success depends on our
collective ability to grow, learn and adapt. We measure the
number of training days provided as a key metric and this
increased in 2023.
Manufacturing excellence
As a manufacturing-led business, the majority of our
workforce are operatives, and we provide opportunities
for people to develop their skills with extensive on the job
training. For example, within our manufacturing plants, we
maintain a competency matrix which identifies the range
of skills required for each task within the manufacturing
process. Individuals are developed across the competency
matrix through a detailed programme of training and
assessment. This is complemented by external market
insight, technical skills and knowledge development received
through partnerships with various suppliers and subject
matter experts.
Underpinning this is our commitment to supporting all
employees with a continuous health and safety training
programme. For example, in Continental Radiators, all
managers participated in training on “creating a socially safe
working environment” in the last year.
Leadership excellence
Leadership is developed at several layers in the organisation.
This year in Continental Radiators, a bespoke leadership
programme was delivered to 36 employees, with the aim
of developing leadership skills across the current and
emerging leadership populations. The participants were from
production, logistics, maintenance and engineering, and all
were presented with a diploma to recognise their successful
completion of the programme. Connected to this was a
one-day leadership event for all managers in manufacturing
and supply chain, aiming to ensure that management and
operatives are aligned. For 2024, a follow-up programme
is scheduled for other employees who are enthused to
participate, along with an advanced class for participants
whohave potential for further development.
Future focus
We continue to invest in developing employees of the future.
This takes a number of formats, including internship and
apprenticeship schemes across the Group. Within the UK we
currently have four apprentices in place, with one apprentice
having recently been shortlisted for the Heating & Plumbing
Award for “Apprentice of the Year”. In Continental Radiators,
we participate in “Procestechniek & Maintenance Limburg”
(“PML”), which is a formal platform to address the shortage
of operators and maintenance technicians in the industry.
Wealso offer scholarships and internships in both Turkey
andContinental Radiators.
Employee engagement
Reflective of our business model, our approach to employee
engagement is decentralised and tailored to local workforces.
We listen to and communicate with our employees through
multiple approaches, including employee feedback
schemes, team meetings, employee magazines and
employee dinners. Whilst these differ in each location, the
focus is on establishing ongoing two-way dialogue with all
employees to ensure that they have a voice in the workplace.
Thisisreinforced through formal employee representation
partnerships, and we have well-established, positive
relationships with trade union partners across our main sites.
The success of this approach to two-way employee
engagement, supported by paying competitive salaries,
providing meaningful work and investing in our people, is
reflected in maintaining our voluntary labour turnover rate
of 8.0%. A more detailed review of employee engagement at
Board level is shown on page 90.
Equality, diversity and inclusion
As an international group, we recognise and enjoy the benefits
of working with a diverse group of colleagues. We are proud
to have a diverse and inclusive workforce which reflects the
communities in which we operate, and we are committed
toproviding an environment where everyone feels valued
andrespected.
Our Group Equality, Diversity and Inclusion Policy guides
and shapes our approach to embedding equality, diversity,
and inclusion into our key people processes. The employee
lifecycle process provides a structured framework for this,
whilst providing the appropriate flexibility for actions to
be developed in different areas of the business that reflect
the decentralised business model, the different legislative
requirements and the cultural norms in each of the
jurisdictions in which we operate.
This year, in line with the new Board diversity disclosure
listing rule, we are reporting on the composition of the
Board and Executive Management in relation to gender and
ethnicity. Details of this can be found on page 72. In addition,
we continue to voluntarily report on gender pay statistics
intheUK, with a full report available on our website.
Annual Report 2023 Stelrad Group plc 33
Enabling an exceptional
workforce continued
Gender
Consistent with the demographics of the wider
manufacturing sector, the majority of our workforce is
male, although female representation in sales, general and
administration (“SG&A”) positions remains higher, at29.3%.
Weare pleased to have appointed Annette Borén to the
role of Chief Financial Officer this year, increasing the
diversity within our talented Executive Management team.
We recognise that further increasing the representation of
women in our business and in leadership roles is important
toour future success, which is why the percentage of women
in the workforce is a key sustainability metric.
Construction is also underway on a larger and more modern
employee changing room. In the UK, six of our senior
managers were trained as mental health first aiders, aiming
to raise awareness of mental health in the workplace and to
equip participants with the skills to promote mental wellness
and identify and provide support as appropriate.
Community
We remain committed to ensuring that each of our businesses
fosters strong, tailored relationships with its local community.
We are proud of the positive impact that we made to our
local community this year, including supporting education,
charitable donations and local sponsorships and partnerships.
In 2023, Radiators SpA was one of the first 500 contributors
to a fundraiser to support Project Autism FVG. The purpose
of the project is to enable severely autistic children who are
currently housed in an institution to live together with their
families in a newly constructed inclusive village. In addition,
Christmas gift packs were given to all employees and to the
parish of Moimacco for distribution to local families in need
of support. In the UK, the Social, Charity and Community forum
continued its fundraising work and provided sponsorship
to a number of employee fundraising events in the year.
Additionally, in September, 47 of our UK employees embarked
on a 14-mile sponsored walk to raise funds for Cancer Research
UK and the Bluebell Wood Children’s Hospice. As well as
supporting physical and mental wellbeing, the event raised a
total of £5,600, which will be split between the two charities.
Spotlight on gender diversity
In Continental Radiators, we participated in Girls’ Day, a
national event focused on introducing girls to science,
technology and manufacturing at a young age. Theevent
attracted approximately 179 girls who completed four
hands-on activities in the company of career guides –
female technical employees from supportive companies.
Denise Sweelssen, our Operations Director, and Sandra
van Os, one of our operatives, participated as guides in
the event. The career guides help the attendees on the
activities whilst discussing their roles, why they chose a
technical career and how they overcame obstacles.
Additionally, our management and human resources
teams in Radiators SpA attended a training course
addressing the increased importance of language
as it relates to gender identity, raising awareness and
understanding of this important issue.
Spotlight on supporting education
This year we participated in a range of career development
activities, including providing work experience and hosting
open days and school leaver days across the Group. In the
UK, we continued to support the Advanced Manufacturing
Engineering (BTEC) programme at Sheffield College as part
of the Employer Skills Academy. Additionally, in September,
the UK opened its doors to the community as part of Make
UK’s National Manufacturing Day, showcasing potential
careers and providing “through the keyhole” tours of the
business to local schools.
In Continental Radiators, we participated in a festival
with Zuyd Hogeschool that connects students with
local companies for traineeships and job opportunities.
Additionally, we provided a tour and information session
for 56 local school children aged eleven and twelve.
The students were able to witness first hand the range
of valuable and interesting occupations available
inmanufacturing.
Wellbeing
We continued to develop our health and wellbeing support with
a focus on physical and mental wellbeing. This is underpinned
by detailed policies and resources that support employees’
wellbeing, including workplace physicians and nurses, external
specialist services, preventative medical examinations and an
Employee Assistance Programme.
Activities to promote improved wellbeing this year include
the construction in Turkey of a spacious and modern
cateringarea and break areas within the factory site.
89.5% 1
10.5%
All employees
70.7% 29.3%
SG&A
77.8% 22.2%
Management
Men Women
37.5%62.5%
Board
Stelrad Group plc Annual Report 202334
STRATEGIC REPORT
Sustainability Report continued
Conducting business responsibly
Conducting business responsibly is a key foundation in
everything we do and underpins all our business activities.
Our approach is guided by a strong culture and a clear set
of values overseen by the Board. Our strengths in corporate
governance, safety, supply chain management and labour
standards enable our progress in other elements of
sustainability and corporate strategy.
Health and safety
Our number one priority is to keep our employees and
contractors safe and healthy, and we aim for zero harm
across all our operations. During 2023, our key priorities
were to maintain long-term progress in our sites in the
UK, Continental Radiators and Termo Teknik, whilst fully
incorporating Radiators SpA into our health and safety
processes. Our performance at Group level registered
some highlights, with lost time severity rate (“LTSR”) falling
significantly, and our lost time frequency rate (“LTFR”)
reducing by 4%. However, our total incident rate remained
at similar levels to 2022. A key stand out is the performance
of our Turkish site, where significant investment in process
automation and operator training, coupled with providing
videos to support work instructions, led to a material
improvement in safety performance. LTFR in Turkey more
than halved, from 7.7 in 2022 to 3.4 in 2023, resulting in a site
where performance had been comparatively lower becoming
the best performing site on safety in 2023.
2023 saw the UK set a new record of 971 days without a
lost time incident (“LTI”). Unfortunately, three LTIs were
recorded in the UK since the record ended in March.
Theincorporation of Radiators SpA into our safety metrics
and processes has identified a number of opportunities for
improvement. LTFRin Italy was seven times higher than in
the rest of theGroup, and reducing this will be a key focus in
2024. Ourexpectation is that this will improve as our safety
cultureand processes become embedded.
Spotlight on safety
Manual handling is one of the main safety risks we face.
Our products are heavy and can cause injuries if handled
incorrectly. One of our main safety strategies is therefore
to identify manual handling within our processes and
act to reduce this. Weutilise many tactics, including
redesigning workflows, rearranging production, utilising
handling equipment such as cranes and forklifts and
investing in automated handling equipment.
The last of these tactics has been instrumental to the
improvement in safety performance of Termo Teknik.
Forexample, we identified points within the production
process where radiators were being lifted from a
platform to floor level. We invested in high-speed robots
to conduct this activity instead. These robots utilise a
radiator grip attachment specifically designed for this
process and, between them, can handle up to eight
million radiators, at a weight of c.160kt, a year. There are
plans to extend this approach in other areas during 2024.
Corporate standards
We maintain high standards, ensuring we respect
fundamental principles of human rights and comply with
all applicable laws and regulations. Thisapproach is enacted
locally but supported by a range of Group policies.
During 2023, we expanded our suite of policies, ensuring
greater consistency. This included updates to our Group
Code of Conduct, which sets the standards of behaviour
which every employee is expected to uphold. We also
developed new Group policies covering information security,
anti-corruption and bribery, sustainable procurement and
the environment. These new policies must be observed by
allemployees and any individual working on our behalf.
Localpolicies must not fall below the Group standards.
One way in which we assess and communicate our corporate
standards is through the EcoVadis platform, which all our
manufacturing sites are members of. In 2023, we achieved
improvements in many areas and have been rewarded with
EcoVadis silver medals in the UK and Continental Radiators
and bronze medals in Radiators SpA and Termo Teknik.
Supply chain management
Our high standards also extend to our suppliers. In 2022 we
developed a process for auditing and assessing our suppliers
in a range of areas including health and safety, human rights,
the environment and product quality. We continued to
develop this process in 2023, rolling it out across the Group.
At the end of the year, we had completed audits on 64%
of our key suppliers and we have a target of reaching and
maintaining this above 75% of our key supplier base by 2030.
Lost time severity rate
2023
2022
2021
54.1
63.5
49.3
Lost time frequency rate
2023
2022
2021
8.8
9.2
10.9
Fatality rate
2023
0
2022
0
2021
0
Total recordable incident rate
2023
2022
2021
5.8
5.8
7.4
Definitions of these metrics are available on page 37.
Annual Report 2023 Stelrad Group plc 35
TCFD Report
This is the third report in which we make disclosures against
the recommendations of the Task Force on Climate-related
Financial Disclosures (“TCFD”). We can report further progress
towards full alignment with the publication of Group Scope
3 emissions (see page 32) and the introduction of several
sustainability targets (see page 28). These targets include a
carbon emissions intensity reduction target. The remaining
gap in our disclosure is on strategy resilience and scenario
analysis. This is yet to be completed as we wish to ensure any
scenario analysis is as meaningful and relevant as possible.
Thisnecessitates more work on building organisational
knowledge and capabilities. This omission means that we are
not compliant with the UK Government’s Climate-related
Financial Disclosures (“CFD”) regulations as we are yet to
provide disclosures against requirement F: an analysis of our
business model, taking into account consideration of different
climate-relatedscenarios.
Our future focus is on expanding our metrics, including
quantifying the financial impact of, and exposure to, climate-
related risks and opportunities. We will also investigate
conducting climate-related scenario analysis.
Sustainability steering group
Monitors progress on the execution of our sustainability
strategy. Periodically updates the Board and the Chief
Executive Officer on progress. Responsible for the initial
assessment of emerging climate-related risks, and for the
co-ordination of identified mitigation actions.
Sustainability
working group
Comprises representatives
from each of the business
units. Responsible for the
day-to-day delivery of our
sustainability strategy and
co-ordination of actions
within each business unit.
Operational
teams
Responsible for site-level
delivery of agreed initiatives,
and involvement in discrete
projects as appropriate.
Interaction is co-ordinated
by either the working group
or the steering group.
Chief Executive Officer
Has overall accountability for our corporate strategy,
including ensuring that this appropriately takes account
of sustainability matters and climate-related risks and
opportunities.
Audit & Risk Committee
Guides the Board in matters related to risk, including
climate-related risk.
Responsible for overseeing the implementation of the
overall risk management framework and for reviewing the
Group’s risk assessment capabilities and processes.
The Board
Responsible for ensuring that appropriate systems and
processes are in place to monitor and manage progress
against our strategy and the identified climate-related risks
and opportunities.
Ensures that sustainability is an essential consideration of
all key decisions, alongside the section 172 requirements.
Governance
The management of climate-related risks and opportunities
follows the same structures as the governance of broader
sustainability issues. The diagram shows the main parties
involved in the governance of sustainability and their main
roles andresponsibilities.
Central to this governance is the sustainability steering group.
This group comprises cross-functional leadership in the
form of the Group Chief People Officer, Group Sustainability
Manager, Group Finance Director, Group Operations Director
and Group Strategic Marketing Director. During 2023, the
terms of reference for this group were developed, which
firmly set out its scope and purpose. Responsibilities include
conducting a periodic review of strategy and prioritisation,
and communicating, co-ordinating and managing resources
across the Group. These activities are led by our Group
Sustainability Manager.
One function of this governance structure is the
management of climate-related risks and opportunities.
Emerging climate-related risks are monitored by both
the working group and the steering group with details of
the risk, its potential impact, and any potential mitigation
actions fed into the Group Sustainability Manager. These
risks and opportunities are recorded on a climate-related
risk and opportunity register, with ownership for the risk
or opportunity being assigned to a member of senior
management, often a member of the steering group.
The climate-related register is reviewed every six months, firstly
by both the working group and the steering group, and then by
the Audit & Risk Committee, alongside business unit registers.
Climate change is included as a principal risk for the Group.
This ensures that climate risks are incorporated into the wider
risk management framework, and that significant emerging or
evolving climate risks are reviewed and assessed by the Audit
& Risk Committee on an ongoing basis. When key issues arise,
these will be raised and discussed with the rest of the Board.
Strategy
We have a clear business strategy (outlined on page 14) which
is supported by our core purpose, helping to heat homes
sustainably. Ensuring that we position ourselves effectively
for the potential impacts of decarbonisation of the heating
industry forms a key part of our strategy and is strongly linked
to the climate risk related to alternative technologies, and
the opportunity for differentiation of our offering which are
outlined on the following pages. An example of how we are
addressing this strategically is shown in the discussion of new
products on page 18.
Climate-related risks have the potential to impact our strategy
delivery in a number of ways. The introduction of electric
radiators into our product offering in more markets in 2023
was a response to the decarbonisation of heating. In future,
legislation and market dynamics may have a direct impact
on costs, potentially affecting our ability to grow market
share. Further, sustainability considerations form part of the
evaluation of potential acquisition opportunities.
We give details of the elements of our Fit for the Future
sustainability framework on page 27, which sets the
framework for how we are addressing our climate-related
risks and opportunities. The identified risks and opportunities
are shown on pages 38 and 39, where we also show the
potential impacts these would have on our business and
strategy. In future years we expect to conduct scenario
analysis to support our understanding of how climate-
related risks and opportunities will impact Stelrad’s business
resilience, strategy and financial planning.
Stelrad Group plc Annual Report 202336
STRATEGIC REPORT
Sustainability Report continued
Risk management
Our wider risk management processes are explained in detail
on pages 48 to 54. Climate change is included at the Group
level as a principal risk, with the detail of risks being captured
in a climate-specific risk and opportunity register. This register
captures the transitional risks associated with adapting to a lower
carbon economy, the physical risks associated with climatic
temperature increases and any opportunities that may arise
and from which we may gain commercial advantage.
Emerging climate-related risks are identified as part of
day-to-day operations and are actively sought by the Group
Sustainability Manager as part of twice-yearly reviews of the
register. The chief responsibility for identifying risks falls to the
members of the sustainability working group, who benefit
from both active involvement in sustainability workstreams,
and exposure to local issues.
Our climate-related risks and opportunities are assessed in
terms of the likelihood of the risk arising over three different
time periods. Short term covers the next financial year (2024),
medium term covers up to five years (to 2029) and long
term considers the impacts beyond this. These time periods
are consistent with the recommendations outlined in the
draft European Sustainability Reporting Standards (“ESRS”).
Likelihood of occurrence is expressed in levels from one to
three, with level one meaning that the risk or opportunity is
unlikely to occur in the period and level three suggesting that
the risk is more likely than not to happen.
Likelihood is assessed in conjunction with the potential
impact if a risk does occur. This impact is defined based on
the likely financial or reputational damage or gain that could
result, with the highest impact relating to events that could
halt our ability to service our customers for a period.
Following this assessment, mitigation and realisation actions
are developed to avoid or reduce the risk, or to ensure we
takeadvantage of the opportunity. The management of
the risk oropportunity and the implementation of the
agreed actions are assigned to a specific member of senior
management, often a member of the sustainability steering
group, who is then responsible for ensuring that risks are
maintained within an acceptable level as defined by the
Board. Thisowner is responsible for updating on any changes
as part oftwice-yearly reviews of the register.
The following pages provide details on the main
climate-related risks and opportunities that have been
identified through this process.
Metrics and targets
The key metrics we use to monitor our strategically material
sustainability issues are shown in the glossary below, with our
performance shown on page 28, and further metrics included
on page 40. These include a range of metrics focused on
energy use and carbon emissions, as well as measurements
of resource use such as water and materials. These metrics
address our material issues and relate to identified risks
enabling us to identify potential areas of targeted action.
Our key metrics include our full Scope 1, 2 and 3 emissions.
High-level carbon data is presented on page 32, and a brief
discussion of the main impacts is shown on page 29. A key
point is the proportion of our value chain emissions that are
accounted for by the sourcing of steel. Our exposure to this
sector is a key consideration for us, and some examples of our
interaction with our steel suppliers are shown on page 30.
We present climate-related sustainability targets for the first
time on page 28, showing our ambitions to reduce carbon
emissions intensity by 45% and increase renewable energy as
a percentage of our energy mix to 45%. The potential inclusion
of climate-related targets in the executive remuneration
scheme will continue to be assessed for future years.
We will continue to focus on improving the quality of our data
and metrics. Priorities over the coming years are to quantify
the financial impact of, and exposure to, climate-related risks
and opportunities, and to develop long-term, absolute carbon
reduction targets in line with climate science.
Sustainability metrics glossary
% of suppliers with up-to-date audits: The proportion
of suppliers who have been the subject of an audit within
agreed timescales – one year for the most important
category of supplier, two years for the second most
important category.
% of women in workforce: The percentage of the
workforce that are female.
Energy from renewable sources: The percentage of
energy used by the business that comes from renewable
sources. Either through self-generation of energy or
supported by Guarantee of Origin certificates or similar.
Fatality rate: The number of fatalities reported due to
work-related injury or illness for every 1,000,000 hours worked.
Lost time frequency rate: The number of lost time
incidents for every 1,000,000 hours worked.
Lost time severity rate: The number of days lost due
toincidents over the year per 200,000 working hours.
Market-based Scope 1 and 2 emissions intensity:
Greenhouse gas emissions from operations, shown as
tonnes of carbon dioxide equivalent per tonne of product
produced. A market-based calculation shows the emissions
from the generators from which the reporter contractually
purchases electricity and/or contractual instruments, rather
than a statistical average for the location of operations.
Plastic packaging intensity: The weight of plastic used in
our packaging divided by the weight of product produced.
Shown as kilograms of plastic per tonne of product.
Recycled content of packaging material used: A weighted
average based on material usage of the recycled content
included in our packaging material.
Total market-based Scope 1 and 2 emissions: The total
emissions of greenhouse gases from operations, as defined
to the left, shown as tonnes of carbon dioxide equivalent.
Total recordable incident rate: The number of recordable
incidents, including those that result in time lost, for every
200,000 hours worked.
Total Scope 3 emissions: Greenhouse gases emitted from
15 categories of activity that take place within the supply
chain, excluding our operations.
Training days per employee: The total number of days
utilised for training divided by the average number of
employees during the year.
Voluntary labour turnover rate: Shows the number of
employees who voluntarily left during the year divided by
the average number of employees during the year.
Annual Report 2023 Stelrad Group plc 37
TCFD Report continued
Climate-related risks and opportunities
Failure to meet stakeholder sustainability expectations or our previous commitments.
Category
Transition risk
Timeframe
Medium and long-term risk
Impact
Medium
Description Impact Mitigation/realisation actions
There is a growing awareness from
stakeholders of a company’s sustainability
performance, especially around climate
and achieving carbon reductions. This
includes examination of performance
against previously stated commitments.
There is a risk that these expectations
are not met.
• Customers may move their business
to competitors with more developed
carbon strategies, resulting in losses
of market share and revenue.
• Stelrad’s access to capital may
worsen, making it more difficult or
costly to invest and impacting the
Company’s valuation.
An appropriate governance structure
exists to ensure that sustainability
matters are prioritised according
to materiality and that we meet
stakeholders’ climate expectations.
This includes managing interfaces
with major stakeholders, ensuring that
perceptions are accurate.
Increased cost of business due to a combination of legislation and market dynamics.
Category
Transition risk
Timeframe
Medium and long-term risk
Impact
Medium
Description Impact Mitigation/realisation actions
Climate change may result in suppliers
developing lower carbon alternatives, for
example through using green hydrogen.
These may come at a higher cost.
Sustainability targets are also leading to the
introduction of legislation, both reporting
(e.g. the ISSB sustainability standards)
and trade (e.g. the EU carbon border
adjustment mechanism). This legislation
is designed to encourage companies to
reduce their environmental impacts and
increase transparency in reporting. This
trend is likely to continue and may differ by
region, affecting some competitors more
than others.
• Legislation may result in increased
input costs, including of raw materials,
energy and transport.
• Cost drivers may lead to changes
to the relative competitiveness of
radiators against alternatives.
• Legislation that requires
additionaldata gathering and
reporting may impact on the
requiredlevel of resourcing.
We continue to monitor legislative
changes and ensure that appropriate
responses are developed. Any internal
process changes that are required will
also focus on efficiency improvements.
We develop the skills and partnerships
necessary to understand market changes
in a timely manner and implement
appropriate responses. Partnerships
with key suppliers and trade bodies are
especially important.
An increase in the use of alternative technology.
Category
Transition risk
Timeframe
Medium and long-term risk
Impact
High
Description Impact Mitigation/realisation actions
The drive to reduce carbon in heating
may lead to new heat emitting
technology entering the market, or an
increase in market share of existing
competing technology.
This could be driven by consumer
behaviour and could be intensified by
policy or legislation.
The future changes may also support
us, leading to the opportunity for
differentiation described on the
next page.
• Any increase in the presence of
competing technologies may reduce
the relative share of radiators and
may impact on Stelrad’s market share
and profitability.
We continue to monitor legislative
changes and assess these for their likely
impact on product choices.
We maintain strong relationships with
customers and specifiers to ensure
the positive attributes of radiators are
understood and incorporated.
Where appropriate, alternative
technologies will continue to be brought
to market as part of our offering.
Stelrad Group plc Annual Report 202338
STRATEGIC REPORT
Sustainability Report continued
Differentiation of Stelrad’s product and service offering.
Category
Opportunity
Timeframe
Medium-term opportunity
Impact
Medium
Description Impact Mitigation/realisation actions
The drive to reduce carbon in heating
may also lead to changes that could
benefit us, including an increasing
demand for higher output products.
There is also the opportunity to bring
new technology to market as part of
our offering.
The buying decision on heating
products is likely to encompass broader
considerations, leading to greater
opportunity for differentiation.
• Opportunities for development of
our product and service offering
anddifferentiation.
• Diversified or increased revenue
streams through growing market
share and from new products.
Realising this opportunity requires that
we have an offering that meets the
changing demands of customers. To
this end, we will continue to focus on
increasing our technical capability, as well
as adapting and optimising our product
offering. An example is the extension of
our electric radiator offering in 2023.
Increased severity and frequency of extreme weather events.
Category
Physical risk
Timeframe
Medium and long-term risk
Impact
Medium
Description Impact Mitigation/realisation actions
The severity and frequency of extreme
events with the capability to cause
damage is increasing. These events
include intense rainfall, flooding,
heatwaves and droughts.
• Damage or disruption to our
production facilities may reduce our
ability to fulfil customer demand.
• Disruption to global supply chains
may reduce our ability to move
product and materials.
• Extreme heat may necessitate
changes to working practices to
maintain worker welfare, which may
impact on productivity or cost.
• Prolonged periods of heat may
createdrought conditions, reducing
access to water in our operations.
All facilities have reactionary processes in
place to adapt to acute events.
Proactive defences (such as fire
prevention or flood defences) are
regularly assessed for adequacy.
Production volume can be flexed across
the Group if specific facilities have issues.
Many inputs are sourced from multiple
suppliers across different regions,
reducing the risk if specific supply routes
are disrupted.
Annual Report 2023 Stelrad Group plc 39
Sustainability metrics table
The below table shows our wider set of sustainability metrics, referring to Sustainability Accounting Standards Board
(“SASB”) metrics where relevant. The inclusion of data from Radiators SpA has led to recalculation of previous years’ data.
Wherehistorical data is not available, this is shown as not available (“n/a”). This table has been expanded since 2022, with a
broader set of metrics being measured and reported.
Unit of measure SASB reference 2023 2022 2021
Driving better
environmental
performance
Energy and carbon
Total energy consumed GJ CG- BF-130a .1 319,657 376,349 456,302
Grid energy % CG- BF-130a .1 58.5% 60.5% 91.3%
Renewable energy % CG- BF-130a .1 41.5% 39.5% 8.7%
Energy consumed from
renewable sources MWh n/a 36,889 41,273 10,999
Fuel consumed from
renewablesources MWh n/a — — —
Purchased electricity from
renewable sources MWh n/a 34,942 39,084 8,866
Self-generated renewableenergy MWh n/a 1,947 2,189 2,133
Global Scope 1 emissions kgCO
2
e EM-IS -110a .1 8,072,896 9,660,097 12,144,248
Global market-based Scope2
emissions kgCO
2
e n/a 4,049,320 5,166,732 20,612,994
Global location-based Scope2
emissions kgCO
2
e n/a 13,928,224 17,041, 370 20,216,233
Global Scope 3 emissions tCO
2
e n/a 445,479 531,456 n/a
Market-based Scope 1 and 2
emissions intensity per tonne kgCO
2
e/tonne n/a 102 110 176
Market-based Scope 1 and 2
emissions intensity per
netrevenue kgCO
2
e/£m n/a 39,333 42,041
n/a
Energy consumption and carbon emissions reduced, largely due to reduced production volumes.
However, the increased proportion of renewable energy achieved despite a drop in self-generated
energy was also key in a further reduction of Scope 2 emissions and intensity.
Water and waste
Total water withdrawn m
3
EM-IS-140a.1 101,298 109,044 n/a
Water usage in areas of
water-stress % EM-IS-140a.1 37.2% 36.8% n/a
Water intensity per tonne l/tonne n/a 849 808 n/a
Water intensity per net revenue m
3
/£m n/a 329 309 n/a
Total waste generated tonnes EM-IS-150a.1 7,547 8,687 n/a
Waste intensity kg/tonne n/a 63.3 64.4 n/a
Waste sent to landfill % n/a 2.3% 1.2% n/a
The reductions in water and waste reflect reduced production output, which also contributed to the
intensity figures increasing or remaining similar, due to reduced efficiency at lower volumes.
Materials
Low-gauge steel purchased % n/a 17.8% 16.3% n/a
Packaging material used tonnes n/a 2,998 3,315 n/a
Plastic packaging material % n/a 48.1% 46.2% n/a
Plastic packaging intensity kg/tonne n/a 12.1 11.4 n/a
Recycled content of packaging
material used % n/a 68.1% 60.5% n/a
Our overall packaging material reduced due to lower production volumes, with the increase in plastic
intensity occurring as a result of changes in product and factory mix.
Stelrad Group plc Annual Report 202340
STRATEGIC REPORT
Sustainability Report continued
Unit of measure SASB reference 2023 2022 2021
Enabling an
exceptional
workforce
Training and development
Training days per person days n/a 2.9 2.6 n/a
Number of apprentices FTE n/a 4 5 4
Training provision was increased from the already high level achieved in 2022, with increases in
Continental Radiators, Radiators SpA and Termo Teknik.
Labour practices
Voluntary employee turnover headcount n/a 112 113 n/a
Voluntary turnover rate % n/a 8.0% 7.3% n/a
Absence rates % n/a 5.3% 7.4% n/a
Voluntary employee turnover was maintained at a relatively low level, while absence rates fell
significantly. Both results are reflective of the success of our employee engagement and safety practices.
Workforce characteristics
Total employees at period end headcount n/a 1,414 1,454 1,287
Permanent employees at
periodend headcount n/a 1,413 1,440 1,263
Temporary employees at
periodend headcount n/a 1 14 24
Full time employees at
periodend headcount n/a 1,379 1,416 1,248
Part time employees at
periodend headcount n/a 35 38 39
All employees – female % n/a 10.5% 11.1% n/a
All employees – male % n/a 89.5% 88.9% n/a
Management – female % n/a 22.2% 18.9% n/a
Management – male % n/a 77.8% 81.1% n/a
Conducting
business
responsibly
Health and safety
Workers covered by ISO 45001
certified management systems % n/a 73.5% 74.6% n/a
Lost time frequency rate rate n/a 8.8 9.2 10.9
Lost time severity rate rate n/a 54.1 63.5 49.3
Total days lost days n/a 705 898 743
Total recordable incidents number n/a 76 82 112
Total recordable incident rate rate EM-IS-320a.1 5.8 5.8 7.4
Total fatalities number n/a — — —
Fatality rate rate EM-IS-320a.1 — — —
All safety metrics showed a positive result, with total incidents reducing by 7% and LTFR by 4%.
Business and supply chain ethics
Total amount of monetary losses
as a result of legal proceedings
associated with bribery
orcorruption £m RT-EE-510a.2 — — —
Total amount of monetary losses
as a result of legal proceedings
associated with anti-competitive
behaviour regulations £m RT-EE-510a.3 — — —
% of key suppliers with
up-to-date audits % n/a 64.3% 19.7% —
Annual Report 2023 Stelrad Group plc 41
The Group has been able
to leverage its significant
experience to help
navigate very challenging
marketconditions.
Annette Borén
Chief Financial Officer
Demonstrating resilience in
challenging conditions
Group overview
The following table summarises the Group’s results for the years ended 31 December 2023 and 31 December 2022.
2023
£m
2022
£m
Increase/
(decrease)
£m
Increase/
(decrease)
%
Revenue 308.2 316.3 (8.1) (2.6)
EBITDA
(1)
41.2 42.2 (1.0) (2.2)
Adjusted operating profit
(1)
29.3 34.0 (4.7) (13.8)
Exceptional items (2.5) (1.8) (0.7) (36.3)
Amortisation of customer relationships (0.1) (0.1) — (147.4)
Foreign exchange differences (2022 only) — (3.5) 3.5 n/a
Impact of IAS 29 (2022 only) — (6.0) 6.0 n/a
Operating profit 26.7 22.6 4.1 17. 9
Net finance costs (7.5) (4.5) (3.0) (65.8)
Monetary losses – net (IAS 29) — (7. 9) 7.9 n/a
Profit before tax 19.2 10.2 9.0 87. 2
Income tax expense (3.8) (5.9) 2.1 36.7
Profit for the year 15.4 4.3 11.1 257.9
Earnings per share (p) 12.11 3.38 8.73 257.9
Adjusted profit for the year
(1)
17.3 24.3 ( 7.0) (28.7)
Adjusted earnings per share – basic (p)
(1)
13.62 19.11 (5.49) (28.7)
Total dividend per share (p) 7.64 7.64
(1) The Group uses some alternative performance measures to track and assess the underlying performance of the business. Alternative performance
measures are defined in the glossary of terms on page 21 and reconciled to the appropriate financial statements line item in note 33. Note 33 also outlines
the limitations of using alternative performance measures.
Stelrad Group plc Annual Report 202342
STRATEGIC REPORT
Finance and business review
Financial overview
Business performance was negatively impacted by a
reduction in demand during 2023. Renovation activity
across the majority of European countries remained weak
throughout the year, driven by a challenging macroeconomic
environment related to high inflation and increasing interest
rates. The impact of volume decline varied by operating
segment, with the UK & Ireland being more robust than
Europe and Turkey & International.
Revenue for the year was £308.2 million, a decrease of
£8.1million, or 2.6%, on last year (2022: £316.3 million). The
decline in revenue was due to a 5.2% decrease in sales
volumes during the year, partially offset by higher selling
prices. Higher selling prices primarily represent the full year
impact of 2022 price increases, in addition to 2023 price
increases, which were applied to recover steel and other
inflationary cost increases. The benefit of price increases
implemented was reduced slightly by a decline in like-for-like
volumes in Europe where average selling prices are higher.
Revenue fell by 12.9% on a like-for-like basis.
Operating profit for the year was £26.7 million, an
increase of £4.1 million, or 17.9%, compared to last year
(2022:£22.6million). The improvement in operating profit
arises despite a small decline in EBITDA of £1.0 million. EBITDA
was adversely impacted by the 5.2% year on year reduction in
sales volumes (12.5%on a like-for-like basis) and, further, the
additional volumes generated by Radiators SpA in the year
were at lower margins which diluted overall Group margins.
The impact of lower sales volumes and lower Radiators SpA
margins was partially offset by proactive selling price and cost
management and foreign currency gains. Cost management
initiatives included operational improvements mainly relating to
increased efficiencies at plants, with the Group fully utilising the
flexibility of its manufacturing footprint. The proactive price
and cost management have driven a 13.0% rise in contribution
per radiator, which is the Group’s key measure of variable
profitability.
The Group continues to push the sale of premium panel
radiators throughout its markets, recognising the additional
margin that these products generate. Despite these efforts,
the proportion of premium panel sales to total volumes was
flat in the year at 5.6% with progress limited due to weakness
in our European markets, where penetration levels are higher,
and growth in designer radiator categories. Pleasingly,
the proportion of premium steel panel to total steel panel
volume increased by 0.2 percentage points, from 6.0% to 6.2%,
and the proportion of premium sales in the UK showed a
marginal improvement in the year. Premium panel products
remain an integral part of the Group’s strategy, with these
products being underrepresented in several of the Group’s
key markets.
In 2022, the Group’s results included foreign exchange
losses of £3.5 million, which were not included in EBITDA.
As a consequence of the change in functional currency of
the Group’s Turkish business these are now reported as part
of EBITDA. In addition, following the change in functional
currency of the Turkish business, the Group no longer applied
IAS 29 in the year ended 31 December 2023, which resulted in
a £4.4 million improvement in operating profit, excluding the
2022 impact of IAS 29 on depreciation of £1.6 million which
remains in 2023.
Depreciation and amortisation increased by £1.9 million in
the year, which is due to the inclusion of a full year’s charge
for Radiators SpA and additional charges following the
completion of significant capital projects.
Exceptional items in the year were £2.5 million, an increase
of £0.7 million compared to the prior year (2022: £1.8 million),
representing exceptional costs of £2.9 million and exceptional
income of £0.4 million. Theexceptional costs in 2023 relate
largely to a restructuring exercise undertaken in quarter four
of the year in order to drive cost savings for future periods.
Theexceptional costs incurred in 2022 related to restructuring
costs to reconfigure and optimise production, acquisition
costs and the reversal of the IFRS 3 uplift on finished
goods and work in progress required as part of business
combination accounting.
Adjusted operating profit for the year was £29.3 million,
a decrease of £4.7 million, or 13.8%, compared to last year
(2022:£34.0 million). Adjusted operating profit was impacted
by the decrease in EBITDA of £1.0 million noted earlier.
Additionally, depreciation and amortisation reported within
adjusted operating profit increased by £3.7 million in the year.
The depreciation and amortisation increase was mainly due
to the 2022 IAS 29-led revaluation of Turkish fixed assets and a
full year’s charge for Radiators SpA.
Profit for the year increased by £11.1 million, or 257.9%, to
£15.4 million (2022: £4.3 million). Adjusted profit for the year
decreased by £7.0 million, or 28.7%, to £17.3 million (2022:
£24.3 million) due to a reduction in adjusted operating profit
and increased interest charges partially offset by a reduction
in tax charges. Earnings per share was 12.11 pence (2022:
3.38 pence), with the 2022 earnings per share impacted by
IAS 29. Adjusted earnings per share was 13.62 pence (2022:
19.11 pence).
At 31 December 2023 the Group had cash of £21.4 million
(2022: £22.6 million) and undrawn available facilities of
£18.7million (2022: £10.1 million), with net debt before finance
leases of £60.4 million (2022: £68.4 million).
Annual Report 2023 Stelrad Group plc 43
Revenue by geographical market
The table below sets out the Group’s revenue by geographical market.
Revenue by geographical market
2023
£m
2022
£m
Increase/
(decrease)
£m
Increase/
(decrease)
%
UK & Ireland 139.4 140.0 (0.6) (0.5)
Europe 149.1 149.7 (0.6) (0.4)
Turkey & International 19.7 26.6 (6.9) (25.8)
Total 308.2 316.3 (8.1) (2.6)
UK & Ireland
The Group’s revenue in UK & Ireland for the year was £139.4 million (2022: £140.0 million), a decrease of £0.6 million, or 0.5%.
This was principally a result of a decrease in sales volumes partially offset by the impact of selling price increases implemented
to mitigate the impact of inflationary costs. On a like-for-like basis, adjusting for the acquisition of Radiators SpA, the Group’s
revenue in UK & Ireland for the year was £139.2 million, a decrease of £0.8 million, or 0.6% from 2022.
Europe
The Group’s revenue in Europe for the year was £149.1 million (2022: £149.7 million), a decrease of £0.6 million, or 0.4%.
Thedecline is primarily due to a decline in like-for-like volumes, partially offset by the full year impact of the acquisition of
Radiators SpA and selling price increases implemented to mitigate the impact of inflationary costs. On a like-for-like basis,
adjusting for the acquisition of Radiators SpA, the Group’s revenue in Europe for the year was £117.9 million, a decrease of
£31.8million, or 21.2% from 2022. Our European markets have been most affected by the weak demand experienced in the year,
giving rise to a significant reduction in like-for-like sales. All markets across Europe have suffered a significant decline, most
notably Germany, Poland and Belgium.
Turkey & International
The Group’s revenue in Turkey & International for the year was £19.7 million (2022: £26.6 million), a decrease of £6.9 million,
or 25.8%. This was principally a result of significantly lower sales volumes to China. On a like-for-like basis, adjusting for the
acquisition of Radiators SpA, the Group’s revenue in Turkey & International for the year was £18.5 million, a decrease of
£8.1million, or 30.5% from 2022.
Adjusted operating profit by geographical market
The table below sets out the Group’s adjusted operating profit by geographical market.
Adjusted operating profit by
geographical market
(1)
2023
£m
2022
£m
Increase/
(decrease)
£m
Increase/
(decrease)
%
UK & Ireland 24.5 22.7 1.8 7.8
Europe 9.1 13.9 (4.8) (34.7)
Turkey & International 1.3 2.1 (0.8) (34.4)
Central costs (5.6) (4.7) (0.9) (20.1)
Total 29.3 34.0 (4.7) (13.8)
(1) Adjusted operating profit is a key performance indicator of the Group and is used by management when analysing performance by geographical market.
UK & Ireland
The Group’s adjusted operating profit in UK & Ireland for the year was £24.5 million (2022: £22.7 million), an increase of
£1.8million, or 7.8%. This was principally as a result of proactive margin management leading to increased contribution per
radiator, partially offset by lower sales volumes and higher post-IAS 29 depreciation.
Europe
The Group’s adjusted operating profit in Europe for the year was £9.1 million (2022: £13.9 million), a decrease of £4.8 million, or
34.7%. The additional volumes generated from Radiators SpA, following the acquisition in July 2022, have only partially offset
a significant like-for-like decline in sales volumes. Additionally, the sales volumes from Radiators SpA are at lower margins.
Like-for-like sales volumes have fallen significantly due to a weak macroeconomic environment which, in addition to higher
post-IAS 29 depreciation, has reduced adjusted operating profit, partially compensated for by proactive margin management.
Turkey & International
The Group’s adjusted operating profit in Turkey & International for the year was £1.3 million (2022: £2.1 million), a reduction
of£0.8 million, or 34.4%. This was principally as a result of lower sales volumes and higher post-IAS 29 depreciation.
Stelrad Group plc Annual Report 202344
STRATEGIC REPORT
Finance and business review continued
Central costs
Central costs for the year were £5.6 million (2022: £4.7 million), an increase of £0.9 million, or 20.1%, partially as a result
ofadditional provisions for bonuses and ongoing inflation.
Exceptional items
During the year the charge for exceptional items was £2.5 million (2022: £1.8 million).
The exceptional items in 2023 mainly relate to a £2.9 million restructuring exercise undertaken in quarter four of the year in
order to drive cost savings for future periods, partially offset by exceptional income related to the acquisition of Radiators SpA
of£0.4 million.
The exceptional items in 2022 related to restructuring costs to reconfigure and optimise production, acquisition costs and the
reversal of the IFRS 3 uplift on finished goods and work in progress required as part of business combinationaccounting.
These costs are one-off in nature and disclosing these costs as exceptional allows the true underlying performance of the
Group to be better understood.
Finance costs
The Group’s net finance costs for the year were £7.5 million (2022: £4.5 million). The increase of £3.0 million is due to an increase
in the interest rate of the Group’s debt (blended 6.3%, including a margin of 2.25%) during 2023 and a higher average level of
debt due to the acquisition of Radiators SpA in July 2022.
Income tax expense
The Group’s income tax expense for the year was £3.8 million (2022: £5.9 million), a decrease of £2.1 million, or 36.7%. The 2022
charge was increased by £1.9 million due to the impact of IAS 29. The 2023 tax charge has benefited from a deferred tax credit
associated with higher tax asset values allowed by the Turkish government due to hyperinflation, partially offset by increased
withholding tax charges associated with the repatriation of cash from Turkey. The Group’s 2023 effective tax rate of 19.6% was
low because of the deferred tax credit. In 2024, the Group’s effective tax rate is expected to be higher at around 29% because
ofthe full impact of the increase in the UK corporation tax rate and ongoing withholding tax charges.
Earnings per share and adjusted earnings per share
Profit for the year increased by £11.1 million, or 257.9%, to £15.4 million (2022: £4.3 million) and basic earnings per share was
12.11pence (2022: 3.38 pence). The weighted average number of shares was 127.4 million (2022: 127.4 million). Adjusted profit
forthe year decreased by £7.0 million, or 28.7%, to £17.3 million (2022: £24.3 million) and, consequently, basic adjusted earnings
per share was 13.62 pence (2022: 19.11 pence).
Dividends and reserves
The Group is committed to delivering returns for its shareholders. It adopted a progressive dividend policy at the time of IPO,
targeting an initial pay-out of approximately 40% of adjusted earnings, with capital allocation focused on reinvestment for
growth. The Group intends to split dividend payments approximately 33% and 67% between the Group’s interim and final
dividend payments respectively across the fiscal year.
The Group paid an interim dividend in respect of theyear ended 31 December 2023 of 2.92 pence per share (2022:2.92pence).
The Board has recommended a final dividend of 4.72 pence per share (2022: 4.72 pence) at a cost of £6.0 million to the Group.
The total dividend in respect ofthe year ended 31December 2023 will be 7.64 pence per share (2022: 7.64 pence).
The Group’s intention to maintain the 2023 dividend at the same level as the 2022 dividend, despite lower earnings due to
short-term trading headwinds, reflects the Board’s prudent view on the current commercial and strategic position of the
business, confidence in the Group’s financial position and cash generation, and the intention to support shareholder returns
through the cycle.
Functional currency
On 1 January 2023, the functional currency of the Group’s Turkish business was changed from Turkish Lira to Euro. The functional
currency change has arisen due to an evolution in the strategic focus of the Turkish business, which led to the Directors confirming
that the Turkish business would be operated primarily as an export company going forward.
Further details on the changes to the relevant underlying transactions, events and conditions that led the Directors to consider
whether the functional currency for the Turkish business should be changed are outlined in note 5 of the consolidated financial
statements. Note 5 of the consolidated financial statements also includes the analysis of the functional currency of the Turkish
business, by reference to the key indicators outlined in IAS 21 The Effects of Changes in Foreign Exchange Rates, which led the
Directors to confirm that the functional currency of the Turkish business is Euro.
IAS 29 Financial Reporting in Hyperinflationary Economies
As a result of inflation in Turkey exceeding 100% over a three-year period, the Group was required to adopt IAS 29 in respect of
its Turkish subsidiary for the first time in the financial statements for the year ended 31 December 2022. On 1 January 2023, the
functional currency of the Turkish business was changed from Turkish Lira to Euro and, as a result, IAS 29 is no longer being
applied after this date.
Annual Report 2023 Stelrad Group plc 45
Cash flow
The following table summarises the Group’s cash flow for the years ended 31 December 2023 and 31 December 2022.
2023
£m
2022
£m
Increase/
(decrease)
£m
EBITDA
(1)
41.2 42.2 (1.0)
Exceptional items (2.5) (1.8) (0.7)
Gain on disposal of property, plant and equipment — (0.2) 0.2
Share-based paymentcharge 0.5 0.3 0.2
Working capital (adjusted for foreign exchange 2022) 1.6 (9.2) 10.8
Net capital expenditure (9.3) (11.6) 2.3
Cash flow from operations
(1)
31.5 19.7 11.8
Income tax paid (7.5) (3.8) (3.7)
Net interest paid (6.2) (3.2) (3.0)
Free cash flow
(1)
17.8 12.7 5.1
Cash flow from operations
(1)
(£m) 31.5 19.7 11.8
Adjusted operating profit
(1)
(£m) 29.3 34.0 (4.7)
Cash flow from operations conversion
(1)
(%) 107.6 57.9 49.7
(1) The Group uses some alternative performance measures to track and assess the underlying performance of the business. Alternative performance
measures are defined in the glossary of terms on page 21 and reconciled to the appropriate financial statements line item in note 33. Note 33 also outlines
the limitations of using alternative performance measures.
The Group’s free cash flow for the year was £17.8 million (2022:£12.7 million), an increase of £5.1 million. This reflects an
improvement in cash flow from operations offset by higher income tax and interest payments.
The Group’s cash flow from operations for the year was £31.5million (2022: £19.7 million), an increase of £11.8million. This
was principally as a result of a slight reduction in working capital in 2023, compared to an outflow in 2022 linked to reduced
production, combined with a return to lower levels of capital spend in 2023. Adjusted operating profit for the period was
£29.3million (2022: £34.0 million), a decrease of £4.7 million, mainly due to an increase in depreciation. Cash flow from
operations conversion for the year was 107.6% (2022: 57.9%), an increase of 49.7pp, reflecting the movements in cash flow
fromoperations described above.
Stelrad Group plc Annual Report 202346
STRATEGIC REPORT
Finance and business review continued
Capital expenditure
The Group’s capital expenditure mainly relate to investment in operating plant and equipment. The following table sets out the
Group’s capital expenditure, including right-of-use assets, net of transfers from assets under construction.
2023
£m
2022
£m
Freehold land and buildings 0.6 2.0
Leasehold buildings 1.1 0.4
Plant and equipment 5.4 7.2
Fixtures, fittings and motor vehicles 2.2 1.6
Intangible assets 0.5 0.2
Total 9.8 11.4
Key capital expenditure in the year ended 31 December 2023 related to the finalisation of the installation of a new steel panel
radiator line at the Group’s facilities in Italy. The Group’s capital expenditure will reduce in future years.
Net debt and leverage
At 31 December 2023, net debt (including finance leases) of £70.3 million (2022: £78.4 million) comprises £81.8 million
(2022:£91.0 million) drawn down against the multicurrency facility and £9.9 million (2022: £10.0 million) finance leases net
of£21.4 million (2022: £22.6 million) cash.
2023
£m
2022
£m
Revolving credit facility – GBP 46.9 55.3
Revolving credit facility – Euro
10.4 10.6
Term loan 24.5 25.1
Cash (21.4) (22.6)
Net debt before finance leases 60.4 68.4
Finance leases 9.9 10.0
Net debt 70.3 78.4
Leverage at 31 December 2023 was 1.47x (2022: 1.62x), based on net debt before lease liabilities. During the year ended
31December 2023, the Group’s revolving credit facility and term loan facility were extended by two years to November 2026
byexercising a two year extension option included in the facility agreement.
Annette Borén
Chief Financial Officer
8 March 2024
Annual Report 2023 Stelrad Group plc 47
The Board has ultimate responsibility for the Group’s system of internal control and risk
management, supported by the Audit & Risk Committee. The Board understands that
successful delivery of its strategic objectives depends on effective risk management
processes that enable the monitoring and mitigation of existing risks and the early
identification of emerging risks.
Risk management approach
The Group’s approach to risk management combines a top
down strategic assessment of risk and risk appetite with a
bottom up operational identification and reporting process.
Top down activities are carried out by the Group Board
and Audit & Risk Committee and consider the strategy and
operating environment of the Group. Bottom up activities
take place across the Group and capture risks that are
significant at a business unit, project or functional level.
The risk evaluation process begins in the business units with
regular exercises undertaken by management to identify
and document the significant risks facing the businesses.
This process ensures risks are identified and monitored and
mitigating management controls are embedded in the
businesses’ operations. Risk management teams are also
set up for specific projects or operations to consider the risks
associated with that project or a specific operational area
of the business; for example, there is a separate climate risk
management team and a separate information security risk
management team. The risk assessments from each of the
operating businesses, and from the project and operational
risk teams, are reported to Group management twice a year
and are considered in determining the principal risks of the
Group with reference to the Group’s strategy and operating
environment. The principal risks of the Group are presented
to the Audit & Risk Committee and the Board for review and
consideration. The principal risks of the Group are mapped to
key performance indicators, where applicable, and these are
reported to the Board at each Board meeting.
New and emerging risks are considered through the regular
risk activities outlined here, regular review of risk research
and other publications, and the results of assurance activities.
Emerging risks are also collated from assessments made by
the business units and through considered risk oversight
across the Group and industry.
Monitoring and mitigation of
existing risks and the early
identification of emerging risks
New and
emerging risks
Product risk Product risk, related to the extended
range of products in Radiators SpA,
including electrical products with fire
risks and shorter lifecycle products, gives
rise to risk of increased product claims
and stock obsolescence.
Technological
change risk
IT lifecycle risk results in behind the curve
reaction to IT developments, meaning
that new and emerging opportunities
are missed.
Insurance risk Insurance risk has increased as a result
of the tightening of insurance markets.
An inability to obtain insurance could
result in some parts of the business
being insufficiently insured, giving rise
tofinancial risk.
This risk is heightened due to current
macroeconomic market conditions and
increasing dependency on the Turkish
production facility.
The Group considers that the process for the management
ofrisk consists of three lines of defence.
First line of defence
Business unit and management activity
Aligns to the bottom up activities detailed here.
Third line of defence
Independent review
Internal audit and other external assurance providers.
Second line of defence
Group Board and Audit & Risk Committee assurance model
Corresponds to the top down activities outlined here.
Stelrad Group plc Annual Report 202348
STRATEGIC REPORT
Risk management
Board Ultimate responsibility for risk management
• Sets Group strategy
• Approves the Group risk management framework
• Sets the Group’s risk appetite
• Top down risk identification
• Reviews the Group’s principal risks
• Sets delegated levels of authority
Audit & Risk Committee Monitors risk management and assurance arrangements
• Supports the Board in risk management responsibilities and activities
• Reviews the effectiveness of key risk management and control processes
Executive Directors Monitor performance and changes in key risks
• Provide regular risk management update reports to the Board and the Audit &
Risk Committee
• Report to the Board and the Audit & Risk Committee on the status of key risks
• Provide guidance and advice to operating companies to assist with identifying
risks, assessing the extent of the impact of identified risks and implementing
mitigating actions
• Oversee health and safety activities
Business units/
operational and
project level risk
management teams
Identify, manage and report local risks
• Maintain local risk registers and risk management plans
• Identify risks
• Identify and implement mitigating actions
• Assess the likelihood and impact of each risk before and after mitigating and
contingent actions are taken
Risk management framework
Top down, bottom up approach
Identification of emerging risks
Risk appetite
The Group Board is responsible for setting and monitoring
the Group’s risk appetite. The Group Board accepts that, in
order to achieve its strategic objectives, and generate suitable
returns for shareholders, it must accept, and manage, a
certain level of risk.
The Group’s approach is to minimise exposure to reputational,
financial and operational risk, while accepting and
recognising a risk and reward trade-off in the pursuit of
its strategic and commercial objectives. The Group Board
assesses its risk appetite across a number of risk categories
according to a five-point scale, where one is zero tolerance of
risk and five is a high tolerance of risk. For example, the Group
has zero tolerance for risks relating to health and safety.
The Group establishes its risk appetite through use of
delegated authorities so that matters considered higher
risk require the approval of senior management or the
Group Board. The Group’s risk appetite remains unchanged
in the year.
Principal risks
The Board confirms that it has carried out a thorough
assessment of the principal and emerging risks facing the
Group. Set out below is the Board’s view of the principal risks
currently facing the Group, along with details of the impact
and strategic relevance of the risks and an explanation of
how the risks are managed or mitigated. Each risk has been
assigned to a risk owner, who is a member of the Group
Board or senior management. The risk rating and risk
appetite have been reported, alongside the trend for each
risk, based upon the changes from prior year. The Board
acknowledges that the Group is exposed to a wide range
of risks; however, only the risks that are believed to have
the greatest impact on the Group delivering its strategic
objectives have been listed.
The climate-related disclosures on pages 36 to 39 document
our approach to climate risk management and our
compliance with the TCFD requirements.
Annual Report 2023 Stelrad Group plc 49
Risk owner Chief Executive Officer and
Group Operations Director
Trend No change
Risk appetite Medium
Risk rating Low
Key stakeholders Customers, suppliers and people
Link to strategy
Risk owner
Chief Executive Officer and Group
Strategic Marketing Director
Trend No change
Risk appetite Medium
Risk rating Low
Key stakeholders Customers
Link to strategy
1. Business disruption 2. Customers
Risk description
The Group could be subject to disruption due to incidents
including, but not limited to, pandemics, major accidents or
natural disasters.
Impact
• A further global pandemic could reduce market demand
for the Group’s products.
• There is a risk of widespread absence caused by infection
without any control measures in place and a consequential
loss of production capacity due to staff shortages.
• The Group’s production and distribution facilities and
processes could be disrupted, due to events including
major accidents and natural disasters, leading to an
inability to meet customer demands.
Mitigations
• Infection and pandemic risk assessments and response
procedures are in place and reviewed regularly. Measures
that could be implemented at short notice include:
– social distancing;
– regular testing on site;
– working from home and segregation of staff; and
– following all applicable government guidance in each
location as prescribed.
• Appropriate fire safety measures are in place at key sites.
• Building modifications have been made to address
flooding risk.
• The majority of stock is stored in racking high off
the ground.
• Accident prevention measures are put in place.
• There is an option and ability to flex production volume
across facilities around the Group.
• Appropriate business interruption insurance is in place.
Risk description
The Group, in some geographies, is overly dependent on
a small number of customers, or on a particular market or
business segment.
Impact
• In certain markets, particularly the UK, the Group derives a
significant proportion of its revenue from a small number
of customers. Failure to manage these relationships or a
change in the organisational structure of these entities
could lead to a loss of demand.
• Customers in declining markets could consolidate suppliers.
• Evolving routes to markets could see a shift in demand.
Mitigations
• The Group continues to maintain and develop strong
relationships in all market channels.
• The Group continues to maintain strong specifier
relationships to generate demand for the Group’s brands
through the distribution channel.
• The Group actively manages and maintains its ongoing
customer relationships.
• The Group will take appropriate measures to seek to regain
lost customers.
• The Group attends customer events and product launches,
and participates in industry forums, exhibitions and events.
• The Group actively manages and maintains brand
websites and its social media presence to establish and
maintain a relationship with the final consumer.
• Commercial strategies will be reviewed and modified
asappropriate.
• Regular strategic planning sessions and analysis of
routesto market.
• Customer surveys and interviews are carried out,
particularly focused on sustainability.
Principal risks continued
1 2 3 4 1 2 3
Strategy key
Growing market share
Improving product mix
Optimising routes to market
Positioning effectively for
decarbonisation
1
2
3
4
Stelrad Group plc Annual Report 202350
STRATEGIC REPORT
Risk management continued
Risk owner
Chief Executive Officer and Group
Strategic Marketing Director
Trend No change
Risk appetite Medium
Risk rating Low
Key stakeholders Customers
Link to strategy
Risk owner Chief Executive Officer and
Group Operations Director
Trend No change
Risk appetite Low
Risk rating Low
Key stakeholders Suppliers
Link to strategy
3. Loss of competitive advantage 4. Supply chain risk
Risk description
New products, innovations or routes to market could cause a
loss ofcompetitive advantage.
Impact
• Competitors could gain a cost, reputation or product
advantage that results in a loss of market share for the
Group or leads to price erosion.
• New product types could enter the market or increase
market share as part of the drive to “zero carbon”, for
example underfloor heating, electrification or fan assisted
heat exchanger products. There could be a resultant loss
ofGroup sales volumes.
Mitigations
• The Group continues to monitor legislative changes.
• The Group will continue to evaluate the potential impact
ofzero carbon initiatives.
• The Group continues to maintain strong customer
andspecifier relationships to determine the most
appropriate solutions.
• Appropriate product types are brought to market under
the Group’s brands, including the introduction of electrical
products across the Group.
• The Group continues to maintain and develop strong
relationships in all market channels.
• The Group continues to maintain strong specifier
relationships to generate demand for the Group’s brands
through the distribution channel.
• The Group attends customer events and product launches,
and participates in industry forums, exhibitions and events.
• The Group actively manages and maintains brand
websites and its social media presence to establish and
maintain a relationship with the final consumer.
• Customer surveys and interviews are carried out,
particularly focused on sustainability.
• The Group invests in the development of new products to
maintain a competitive advantage in changing markets.
• The Group invests in appropriate energy saving initiatives
across its sites in line with its sustainability strategy.
• The Group will continue to tightly monitor and
control costs.
• The Group builds relationships with developers who are
most likely toadopt alternative solutions.
Risk management in action
• Read more about how we are positioning effectively for
decarbonisation through our product range on page 18.
Risk description
Failure of the supply chain either due to lack of availability or
unforeseen price increases.
Impact
• A reduction of raw material availability, in particular
steel availability, could restrict the ability of the Group to
manufacture products or negatively impact profit margins.
• Reduced security and availability of energy supply could
restrict the ability of the Group to manufacture products.
• Unforeseen increases in raw material prices, in particular
steel price and energy prices, could harm profit margins.
• Inflationary price increases could harm profit margins.
• The Group has a complex, wide-ranging distribution
chain which is critical to the success of the Group and any
disruption in the supply chain could impact on the ability
of the Group to meet customer demands and/or cause a
reduction in profitability.
Mitigations
• Raw material is dual sourced with all key components
and materials having a secondary provider; this extends to
location dual sourcing.
• Raw material prices are constantly monitored by the business.
For the purchase of raw materials, stocks are maintained to
protect against sharp price rises and buy prices are agreed in
advance which gives a clear understanding of future prices.
• Where prices are rising the business has sufficient
foresight to implement selling price increases.
• Sufficient stock levels are maintained across the Group to
prevent against short-term supply issues.
• The Group undertakes ongoing supplier performance and
relationship building meetings, alongside supplier reviews
and audits.
• Long-term relationships are maintained on good terms
with trusted shipping partners.
• Options are available to use alternative forms of transport,
for example trucks instead of shipping.
• Energy prices are fixed with suppliers for the forthcoming
year where this option is available.
• There is an option and ability to flex production volume
across facilities around the Group.
• The Group pays suppliers on a timely basis.
• The Group will review and control any discretionary spend.
• The Group will continue to tightly monitor and control costs.
• Solar panels are in place at the warehouse in Heerlen, the
Netherlands, and at the Radiators SpA factory in Italy.
Risk management in action
• Read more in our spotlight on steel purchasing on page 30
and our spotlight on partnerships on page 31.
• Go to page 41 to view the KPI for suppliers with
up-to-date audits.
1 2 3 4 1 2 3 4
Annual Report 2023 Stelrad Group plc 51
5. IT failure or cyber breach 6. People and culture
Risk description
Prolonged or major failure of the Group’s IT systems or a
significant security breach.
Impact
• A cyber attack at one of the Group’s facilities could disrupt
its production and/or distribution capabilities leading to
aninability to meet customer demands.
• Failure of our IT and communication systems could
affect any or all of our business processes and have
significant impact on our ability to trade, collect cash
andmake payments.
Mitigations
• IT and cyber training and education, particularly around
the identification of fraud, are delivered to all staff.
• Appropriate access rights are applied on all IT systems
across the business.
• Appropriate security software is installed, including
firewalls and anti-malware, to protect our IT systems.
• Email scanning processes are implemented.
• Robust systems and processes are in place including
databack-ups.
• Third party penetration testing is carried out by all sites.
• The business uses internal and third party expertise to
keep up to date with the latest developments.
• Disaster recovery plans are in place.
• There is continued investment in and maintenance of IT
systems across the Group.
• The Group appointed cyber security consultants to provide
a security operations centre and other related services to
the Group.
• An Information Security Working Group has been set up
across the business to share best practice across the Group.
Risk description
Being unable to retain key personnel and attract skilled
individuals or deterioration of our relationships with unions
and workers’ representatives.
Impact
• The loss of key personnel or the inability to put the correct
succession planning in place could lead to a shortage of
experience that could damage business performance.
• Labour shortages/workforce strikes or the increase in costs
of skilled labour could increase the costs of the Group or
lead to delays in production.
• Inflationary increases in staff costs could harm profit margins.
• Lower than inflationary pay increases could result in
workforce losses.
Mitigations
• Deputies are in place for immediate interim assumption
ofkey roles.
• Longer-term succession planning focuses on identification
and development of potential successors for key roles.
• Documented processes are in place for key functions to
ensure continuity of process.
• Policies and procedures are embedded to ensure
appropriate management practices and to minimise
therisk of fraud or error.
• Knowledge sharing and support are available from
otherfunctions and sites.
• Any necessary recruitment process will be identified,
commenced and progressed in a timely manner,
wherenecessary.
• Relationships with unions and works councils are
managed closely.
• Pay rates are maintained at a competitive level to attract
and retain staff.
• Training and development programmes are in operation,
including apprenticeship and other formal trainee
programmes, alongside individual performance reviews.
• Employee relationships are well maintained locally
through employee engagement activities and regular
communications, including newsletters.
• During the year, the Group has updated and broadened its
Group policies, including the introduction of an environmental
policy, an information security policy and a sustainable
procurement policy; the Group will continue to build upon
andimprove its Group policies in future years as required.
Risk management in action
• Read more in our spotlight on gender diversity and our
spotlight on supporting education on page 34.
• Go to page 41 to view our KPIs on enabling an
exceptionalworkforce.
Risk owner Chief Executive Officer and
Group Finance Director
Trend No change
Risk appetite Low
Risk rating High
Key stakeholders Customers, suppliers,
people and investors
Link to strategy
Risk owner Chief Executive Officer and
Chief People Officer
Trend No change
Risk appetite Low
Risk rating Medium
Key stakeholders People
Link to strategy
Principal risks continued
1 2 3
1 2 3
Stelrad Group plc Annual Report 202352
STRATEGIC REPORT
Risk management continued
7. Health and safety
Risk description
Failure to comply with health and safety legislation and
regulatory requirements including obligations to take the
correct measures to prevent fatalities or serious injury.
Impact
• The Group’s production, manufacturing and distribution
operations are carried out under potentially hazardous
conditions. Accidents, events or conditions that are
detrimental to the health and safety of the Group’s
employees, including, for example, as a result of operating
heavy machinery, could have a material adverse effect on
the Group’s business, reputation and financial results.
Mitigations
• Health and safety is proactively managed with robust
processes in place to identify and manage risks.
• Health and safety training is provided regularly across
the Group.
• The Group has invested heavily in reducing risk, for
example by introducing appropriate machinery guarding
and also introducing robotics.
• Where health and safety incidents arise, there are
rigorousprocesses in place to learn from these incidents
and put in place procedures and training to prevent them
from reoccurring.
Risk management in action
• Read more in our spotlight on safety on page 35.
• Go to page 41 to view our health and safety KPIs.
8. Political and economic environment
Risk description
Failure to evolve business practices and operations in response
to the changing political and economic environment.
Impact
• The change in political conditions in Turkey could
give riseto an adverse change in the Group’s Turkish
operations, either due to the costs to produce, the
availability of labour or the ability for Turkey to interact
globally with other economies.
• A change in political conditions in any of the countries
inwhich the Group operates could give rise to an adverse
change in the Group’s operations.
• The Group is exposed to potential changes in economic
circumstances as a consequence of political events,
examples of which include exchange rate fluctuations
andreductions in private disposable income.
• Inflationary price increases could harm profit margins;
this is a particular risk in Turkey where the Turkish Lira
hasbeen hyperinflationary in recent years.
• High inflation across Europe could lead to a reduction
inconsumer spending.
• A significant increase in interest rates would increase
interest costs for the Group.
• Market lending capacity could reduce.
Mitigations
• The Group continuously monitors legislative changes
andevaluates any potential impact.
• Exchange rate fluctuations are mitigated using the natural
hedge of key currency spend where possible.
• For currencies where there is no natural hedge and
where deemed necessary, appropriate exchange forward
contracts are entered into to fix the parity over the short
tomedium term in line with the Group’s hedging policy.
• The Audit & Risk Committee has reviewed and approved
the Group’s currency hedging strategy.
• The Group monitors and actions loan renewals on a timely
basis. The existing loan facility was extended for a further
two years during 2024.
• There is an option and ability to flex production volumes
ateach of the Group’s facilities.
Risk owner Chief Executive Officer, Chief
People Officer and Group
Operations Director
Trend No change
Risk appetite Low
Risk rating Low
Key stakeholders People
Link to strategy
Risk owner Chief Executive Officer,
ChiefFinancial Officer, Group
Operations Director and Group
Strategic Marketing Director
Trend Increasing
Due to ongoing macroeconomic
uncertainty and increased
production in Turkey
Risk appetite Medium
Risk rating Medium
Key stakeholders Customers, suppliers, people
andinvestors
Link to strategy
1
1 4
Annual Report 2023 Stelrad Group plc 53
Climate change
Failure to manage and mitigate climate change is
identified as a risk on the Group register. Given the scale
and the potentially significant impact of climate risk
on the Group, it is essential to understand how climate
change might impact the business and which strategies
may be employed to mitigate any exposure to the
business. Expertise and resources have been allocated
to manage climate risk across the organisation and to
determine the impact that this risk may have on the
business model and the broader Group strategy over the
short, medium and long term. Climate risk is considered
at a Board level when discussing Group strategy and
making Board decisions.
Work undertaken by the Group to date to understand
the impact of climate change, as well as potential risks
and opportunities considered by the business, are further
outlined in the TCFD section found on pages 36 to 39.
9. Climate change
Risk description
Failure to evolve business practices and operations in
response to climate change.
Impact
• See climate-related risks on pages 38 and 39.
Mitigations
• See climate-related risks on pages 38 and 39.
Risk management in action
• Read more in our spotlight on energy usage on page 30.
• Go to page 40 to view our KPIs for driving better
environmental performance.
Risk owner
Chief Executive Officer and Group
Strategic Marketing Director
Trend Increasing
Due to heightened awareness
of the impacts of changes in
global climate
Risk appetite Low
Risk rating Medium
Key stakeholders Communities and
theenvironment
Link to strategy
Principal risks continued
1 4
Stelrad Group plc Annual Report 202354
STRATEGIC REPORT
Risk management continued
Viability statement
The Board has considered the viability of the Group over a three-
year period to 31 December 2026, taking into account the Group’s
current financial position and forecasts, as well as the potential
impact of the principal risks and uncertainties facing the Group.
The three-year period chosen is one for which the Board believes
that it can forecast with a degree of accuracy and certainty. While
the Board has no reason to believe that the Group will not be
viable over a longer period, it recognises that there is inherent
uncertainty involved in looking further forward than three years.
The Board believes that this time frame also increases reliability
in the modelling and stress testing of the Group’s viability and
provides the users of the Annual Report with a reasonable degree of
confidence over the Group’s viability. Additionally, three years aligns
with the Group’s business planning cycle and a three-year horizon
is typically the period over which the Group reviews its external
bankingfacilities.
The Group’s annual business plan process looks at financial
projections for the next three years, including profitability, balance
sheet liquidity and cash flow. The business plan is a detailed bottom
up process and is used to perform central debt, headroom and
covenant compliance analysis. A sensitivity review is performed
on the most significant risks, aswell as a combination of those
risks. The output of the annual business plan process is reported
to the Board for consideration. The Group monitors performance
through the financial year against this budget and prior year actual
performance with a formal reforecast process conducted on at least
a quarterly basis.
The financial position of the Group remains robust. On 8 July
2022, the Group increased its debt facility by £20 million by means
of an accordion increase and now has in place a £100 million
multicurrency facility, made up of a £76.027 million revolving credit
facility and a €28.346 million term loan facility. At 31 December
2023, the whole term loan was drawn along with £57.3 million of
therevolving credit facility. The facility was extended by two years
during the year and now matures in November 2026.
The Board believes that the business model remains highly
relevant to the long-term viability of the Group. The regulatory drive
towards making new and existing homes more energy efficient
will continue, meaning that there will be increased opportunities to
play a part in providing greener solutions for heating homes.
The Board has carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business
model, future performance, liquidity or solvency. Principal risks to
the business are identified through the risk management process
and are set out on pages 48 to 54. They are recorded in a Group risk
register, which is reviewed and discussed at Audit & Risk Committee
meetings, which are held at least three times per annum.
The review has considered all the principal risks identified by the
Group, but a selection of risks were considered to pose a severe but
plausible downside scenario if they occurred. These risks have been
stress tested to assess the viability of the Group. The sensitivities
modelled used the same assumptions as for the going concern
statement, as set out in the going concern statement later on this
page, for the years ending 31 December 2024 and 31 December
2025 with further assumptions applied for the year ending
31December 2026.
The Board has carefully considered the principal risks of the Group
and the impact of those risks on the viability of the Group and has
concluded that there is no reason to believe the Group will not be
viable over the period assessed.
Going concern statement
The financial position of the Group, its cash flows and liquidity
position are set out in the financial statements. Furthermore, note
31 to the consolidated financial statements includes the Group’s
objectives and policies for capital management, and note 32 to the
consolidated financial statements outlines the Group’s financial
risk management objectives and policies, details of its financial
instruments and its exposure to credit and liquidity risk.
As part of its year-end review, the Directors have performed a
detailed going concern review looking at the Group’s current
financial position and forecasts, cash flows, liquidity and loan
covenant compliance over the forecast period, and taking into
account the potential impact of the principal risks facing the Group.
The Directors have also applied severe but plausible downside
scenario testing to the Group forecasts. Under a severe but plausible
downside scenario, the Group remains within its debt facilities and
its financial covenants until 31 December 2026.
Based on the output of this going concern review, the Directors
have concluded that, at the time of approving the financial
statements, the Group will be able to continue to operate within
its existing facilities and is well placed to manage its business risks
successfully. The Directors also used the financial forecasts as the
basis for their assessment of the Group’s ability to continue as a
going concern for at least twelve months from the date of the
financial statements. Therefore, the financial statements have been
prepared on a going concern basis.
The Group meets its day-to-day working capital requirements
through a £100 million bank loan facility, made up of a £76.027
million revolving credit facility and a €28.346 million term loan
facility, which is in place up to November 2026. At the year-end
date the Group had drawn down the whole term loan along with
£57.3 million of the revolving credit facility. The remainder of the
facility and cash balances of £21.4 million were available to enable
day-to-day working capital requirements to be met.
The financial covenants on the £100 million bank loan facility
are for leverage (net debt (excluding IFRS 16 finance leases)/
adjusted EBITDA (before exceptional items and foreign exchange
differences)) of not more than three times and for interest cover
of not less than four times. The Group has complied with the
covenants during the year ended 31 December 2023 and, as
discussed above, is forecast to comply with the covenants for the
next three financial years. The calculation of net debt (excluding
IFRS 16 finance leases) and adjusted EBITDA (before exceptional
items and foreign exchange differences) are provided in note 33.
The forecast base case scenario has been prepared using robust
forecasts from each of our operating companies, with each
considering the risks and opportunities the businesses face. Two
key sensitivities have been applied to prepare what is considered to
be a severe but plausible downside scenario, these being:
• the reduction in volumes; and
• a reduction of the contribution per radiator from forecast levels
to reflect a reduction in profitability due to external factors.
Volumes
Volumes could reduce in the future due to competitive pressures or
market weakness and this has been modelled as a downside risk.
Contributions per radiator
The Group’s contribution per radiator sold has increased in recent
years. There is a downside risk that competitive pressures could
reduce the Group’s contributions in the future.
In the downside scenario, volumes have been reduced and the
contribution per radiator has been reduced for the whole period.
Under these circumstances, the Group would remain compliant
with both of its covenants without the adoption of mitigating
actions. Mitigating actions could include restructuring the cost
base, and implementation of further cash saving measures, such
as reducing advertising costs and other discretionary expenditure,
deferral of capital expenditure, delayed/reduced dividend payments
and active management of net working capital.
Annual Report 2023 Stelrad Group plc 55
Viability statement and going concern
Non-financial and sustainability information statement
The table below sets out where information relating to non-financial and sustainability matters can be found in our Strategic Report.
Compliance statement
Stelrad Group plc has complied with the requirements of sections 414CA and 414CB of the Companies Act 2006 (as amended
by The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022) with the table disclosed below
and other disclosures throughout the Strategic Report. The climate-related financial disclosures of the Company are contained
within the Task Force on Climate-related Financial Disclosures (“TCFD”) section, on pages 36 to 39 of this Annual Report.
Reporting
requirement Relevant policies and standards whichgovern our approach Read more in this report
Page
reference
Environmental
matters
• Risk management
framework(including
climaterisk management)
• Code of Conduct
• Local corporate social
responsibility policies
• UN SDGs
• ISO 14001 (environmental
management) and ISO 50001
(energy management)
• Sustainability strategy and
sustainability framework
• Environmental policy
• Sustainable
procurement policy
• Risk management
• Sustainability Report
• Task Force on
Climate-related
FinancialDisclosures
• Stakeholder engagement
48
26
36
22
Climate
change and
sustainability
• Risk management
framework(including
climaterisk management)
• UN SDGs
• ISO 14001 (environmental
management) and ISO
50001 (energy management)
• Sustainability strategy and
sustainability framework
• Environmental policy
• Sustainable
procurement policy
• Risk management
• Sustainability Report
• Task Force on
Climate-related
FinancialDisclosures
48
26
36
Employees • Whistleblowing policy
• Equality, Diversity and
Inclusion Policy
• Code of Conduct
• Health and safety policies
andprocedures
• Sustainability strategy and
sustainability framework
• Conflicts of interest policy
• Social dialogue statement
• Information security policy
• Stakeholder engagement
• Sustainability Report
• Directors’
Remuneration Report
• Nomination
Committee Report
• Statement of corporate
governance
• Audit & Risk
Committee Report
22
26
74
70
61
65
Social matters • Group purpose and values
• Code of Conduct
• Local corporate social
responsibility policies
• Equality, Diversity and
Inclusion Policy
• Social dialogue statement
• Stakeholder engagement
• Sustainability Report
22
26
Human rights • Modern slavery statement
• Equality, Diversity and
Inclusion Policy
• Code of Conduct • Stakeholder engagement
• Sustainability Report
• Statement of corporate
governance
22
26
61
Anti-bribery
and
corruption
• Code of Conduct
• Anti-corruption and
bribery policy
• Dealing policy
• Insider dealing and market
abuse policy
• Conflicts of interest policy
• Statement of corporate
governance
• Audit & Risk
Committee Report
61
65
Business
model
n/a • Our business model
• Our strategy
12
14
Principal risks • Risk management framework • Risk management 48
Non-financial
KPIs
n/a • Key performance indicators
• Sustainability Report
20
26
Stelrad Group plc Annual Report 202356
STRATEGIC REPORT
Non-financial and sustainability information statement
debate and decision making processes of the Board, to the
benefit of all stakeholders.
On 22 November 2023, we welcomed Annette Borén to the
Board as Chief Financial Officer, replacing George Letham.
Following the appointment of Annette Borén, the Board
comprised five male and three female Directors, meaning
37.5% of our Board was female at 31 December 2023. At
31December 2023, two women held senior positions on the
Board – Annette Borén as Chief Financial Officer and Terry
Miller as Senior Independent Director. At 31 December 2023,
no Board members were of a minority ethnic background.
The Company has met one of the three new targets for
diversity in the Listing Rules. Further details on the Group’s
progress against the new targets for diversity prescribed by
the Listing Rules can be found in the Nomination Committee
on pages 70 to 73.
The appointment of Annette Borén in the year was the
output of the Nomination Committee’s succession planning
work in anticipation of the planned retirement of George
Letham. We thank George Letham for his hard work and
commitment to Stelrad Group plc over the last 20 years.
On 1 February 2024, Katherine Innes Ker was appointed to the
Board as Senior Independent Director, replacing Terry Miller
who resigned on 31 December 2023. We would like to thank
Terry Miller for her contribution to the Board since the Group
listed in 2021.
The Board continues to encourage diversity and inclusion across
the Group, and the Board and the Nomination Committee
remain focused on this area when considering Board succession.
Internal audit
I am pleased to note that the work of the internal audit
function, led by the Audit & Risk Committee, continued to
evolve in the year. The initial programme of key financial
controls reviews is complete and focus has now turned to a
risk-based approach targeting the key risks that the Group
faces, and in particular, those risks where there is a higher
reliance on controls.
Board evaluation
The Board evaluation process continues to gather
momentum. It is pleasing to see the actions of the 2022
evaluation being addressed and also to see additional
progressive recommendations being made during the 2023
evaluation. Addressing the 2023 recommendations will be a
key focus for 2024.
Stakeholders
The Board understands the importance of listening to all
stakeholders and making sure that their views are heard and
acted upon. Our Section 172 Statement on page 22 details
how the Board has engaged with stakeholders during the year.
The strategy and business model of the Group aim to deliver
sustainable growth for the business and long-term benefits
for all stakeholders.
The Board looks forward to the Annual General Meeting
ofthe Group as an opportunity to continue to engage with
our stakeholders.
Bob Ellis
Chair
8 March 2024
Dear shareholders
On behalf of the Board, I am pleased to present the Corporate
Governance Report of Stelrad Group plc. The report summarises
the governance structure and the governance procedures of
the Group and, specifically, sets out the following:
• details of the Board of Directors, their biographies and the
Board skills matrix (pages 58 to 60);
• the role of the Board and how it delegates authority (page 61);
• the key roles of the Board and the division of
responsibilities (page 62);
• the Audit & Risk Committee Report (pages 65 to 69);
• the Nomination Committee Report (pages 70 to 73);
• the Remuneration Committee Report (pages 74 to 87); and
• the Directors’ Report (pages 88 to 91).
Purpose, culture and values
The Board believes that good governance enhances long-term
shareholder value and promotes a sustainable business. The
Board also believes that all decisions should be made for
the benefit of all stakeholders and to ensure the long-term
success of the Group. It is a priority of the Board to set the
culture and values of the Group and to lead by example.
Each member of the Board brings their own set of skills,
knowledge and experience. We believe that their broad ranging
knowledge and experience enable them to provide independent
challenge in Board discussions and enhanced insight to the
Group’s business model and strategy. Details of the Board of
Directors and their biographies can be found on pages 58 and 59.
The core purpose of Stelrad Group plc of helping to heat
homes sustainably is proudly delivered by the Group
with oversight from the Board. Our core purpose is a key
component of our sustainability framework, which is outlined
in the Sustainability Report on pages 26 to 41.
The Group has established five values that provide its moral
compass, governing the fundamentals of who we are and
what we believe is right. These values define the culture we
seek to maintain:
• respect – we harness the power of diversity and inclusion
in our business, trust those we work with, and value
everyone’s contribution;
• integrity – we operate with honesty, transparency and
fairness in all we do;
• service – we act with empathy and humility, putting people
and businesses we serve at the centre of what we do;
• excellence – we champion innovation, and use our energy,
expertise and resources to make a positive difference to
the environment; and
• stewardship – we prize sustainability, and are passionate
about leaving things better than we found them.
Compliance with the 2018 UK Corporate
Governance Code
The Board is committed to the highest standards of corporate
governance. Since admission, we have strived to comply with
the 2018 UK Corporate Governance Code (the “Code”); further
details are included in the statement of corporate governance
on page 61.
Board composition, diversity and
succession planning
The Board recognises the advantages of having a diverse
and inclusive Board in bringing different perspectives to the
Annual Report 2023 Stelrad Group plc 57
Chair’s introduction to governance
GOVERNANCE REPORT
Bob Ellis
Chair
Bob Ellis is a Director and the
Chair of the Board and joined
the Group in August 2009.
Skills and experience
Mr Ellis has a strong financial
background with significant
experience in operational
restructuring and has
also worked with various
companies with private
equity ownership, across a
number of sectors, including
the retail, manufacturing
and construction sectors.
External appointments
Mr Ellis currently holds
directorships on the board
of Whittan Group as chair of
the remuneration and audit
committees,the board of
Reconomyas chair of the
board and remuneration
andaudit committees and
the board of Outright Games
as chair ofthe remuneration
and audit committees.
Annette Borén
Chief Financial Officer
Annette Borén is a Director
and the Chief Financial
Officer of the Group,
having joined the Group in
November 2023.
Skills and experience
Mrs Borén has close
to 30years of finance
experience and held several
senior finance roles prior to
joining the Group, including
chief financial officer and
head of sustainability at
Hilti Northern Europe,
vice president and chief
financial officer at Doro
listed on Nasdaq and
non-executive director at
Sparbanken Oeresund.
External appointments
Mrs Borén is chapter
chairwoman for the Swedish
Chamber of Commerce in
the North West and chairs
the sustainability group
atConstruction Excellence
at BRE, The British
ResearchEstablishment.
Trevor Harvey
Chief Executive Officer
Trevor Harvey is the Chief
Executive Officer of the
Group and joined the Group
in January 2000.
Skills and experience
Prior to joining the
Group, MrHarvey held
management positions
as managing director
of Myson Radiators and
managing director of Myson
Heat Emitters, both of
which operate within the
radiator and heat emitter
sector. Trevor studied at
the University of Newcastle
upon Tyne and graduated
with a BSc (Hons) in
MechanicalEngineering.
External appointments
Mr Harvey is currently
a director of ISG Boiler
Holdings Limited, a
holding company whose
subsidiaries are engaged
in the manufacture and
distribution of boilers, and
has held this position since
January 2002.
Edmund Lazarus
Non-Executive Director
Edmund Lazarus is a Non-
Executive Director and joined
the Group in November 2014.
Skills and experience
Mr Lazarus is also managing
partner and founder of EMK
Capital. Prior to EMK Capital,
Mr Lazarus was managing
partner of Bregal Capital
which he co-founded in
2002. He has been in senior
private equity positions for
over 20 years. Mr Lazarus’
prior career was as a strategic
consultant with Bain & Co
and as an M&A and corporate
finance adviser with SG
Warburg and Merrill Lynch
before entering the private
equity industry with Morgan
Stanley Capital Partners.
External appointments
In addition to being a
partner of EMK Capital
LLP, Mr Lazarus holds a
number of other external
appointments in private
equity portfolio companies.
A broad range of leading
industry, corporate and
financial skills andexperience
N
Former Directors
• George Letham retired from the Board as Chief Financial Officer on 22 November 2023.
• Terry Miller resigned from the Board as independent Non-Executive Director and the Senior Independent Director on
31December 2023.
• George Letham and Terry Miller had both served on the Board since admission to the London Stock Exchange’s Main
Market in 2021.
Stelrad Group plc Annual Report 202358
GOVERNANCE REPORT
Board of Directors
Nicholas Armstrong
Non-Executive Director
Nicholas Armstrong is a
Non-Executive Director
and joined the Group in
November 2015.
Skills and experience
Mr Armstrong is a partner
and member of the founding
team at EMK Capital. Prior to
EMK, Mr Armstrong was part
of the Bregal Capital team
from mid-2014 and worked
extensively across a number
of portfolio companies
including Stelrad Group.
Prior to joining Bregal,
Mr Armstrong worked in
Nomura’s UK M&A team
in London and Nomura’s
Australian M&A team in
Sydney. He graduated from
the University of Sydney
with a Bachelor and Master
of Commerce.
External appointments
In addition to being a
partner of EMK Capital
LLP, Mr Armstrong holds a
number of other external
appointments in private
equity portfolio companies.
Nicola Bruce
Non-Executive Director
Nicola Bruce is an
independent Non-Executive
Director and joined the
Group in October 2021.
Skills and experience
In addition to her significant
non-executive Board
experience, Ms Bruce was a
partner at the Monitor Group
(now Deloitte) and group
director of strategy at De La
Rue plc. Ms Bruce holds a
number of non-executive
roles in the housing
and building materials
sectors. She is a fellow of
the Chartered Institute of
Management Accountants
and holds an MBA from
INSEAD and an MA (Hons)
PPE from Oxford University.
External appointments
Ms Bruce is currently a
non-executive director of
Ofwat, the economic water
regulator for England and
Wales, a non-executive
director and chair of the
remuneration committee
for Ibstock plc and Gleeson
plc, and senior independent
director and chair of the
remuneration committee for
the Anchor Hanover Group.
Katherine Innes Ker
Non-Executive Director
Katherine Innes Ker is the
Senior Independent Director
and joined the Group in
February 2024.
Skills and experience
Dr Innes Ker has gained
extensive executive and
non-executive experience
across a range of sectors
in a career spanning over
30 years. She was a non-
executive director of Vistry
plc until 2023, and senior
independent director of
Go-Ahead Group until 2020.
Katherine has also held
positions as a non-executive
director at Taylor Wimpey
plc, St Modwen Properties
plc, Bryant Group plc,
Gigaclear Ltd, Colt Group
SA, Gyrus Group plc, and the
Ordnance Survey. She was
chair of Sovereign Housing
Association and Victoria
Carpets, and deputy chair of
Marine Farms ASA. Katherine
holds an MA (Hons) in
Chemistry and a DPhil in
Molecular Biophysics from
Oxford University.
External appointments
Dr Innes Ker is currently
chair of the MAB plc, senior
independent director and
chair of the remuneration
committee of Forterra plc,
non-executive director of
Ground Rents Income Fund
plc, and chair of toob ltd. She
is chair of the remuneration
committee of Balliol
College, Oxford.
Martin Payne
Non-Executive Director
Martin Payne is an
independent Non-Executive
Director and joined the
Group in October 2021.
Skills and experience
Mr Payne is an experienced
chief executive officer
and was formerly the
chief executive officer of
Genuit Group plc (formerly
Polypipe Group plc), a UK
FTSE 250 building materials
company which serves the
construction industry by
providing sustainable water
and climate management
solutions. Prior to that Mr
Payne was chief financial
officer of Polypipe Group plc,
and has also held the roles
of group finance director
at Norcros plc and group
financial controller at JCB,
the construction equipment
manufacturer. Mr Payne was
also a director and chairman
of the Construction Products
Association, the trade
association that represents
the UK building materials
industry. Mr Payne is a
qualified accountant and
a fellow of the Chartered
Institute of Management
Accountants and holds a BA
(Hons) in Economics from
Durham University.
External appointments
Mr Payne is currently a
non-executive director of
Churchill China plc.
Committee key
A
Audit & Risk
N
Nomination
R
Remuneration
Chair of Committee
A
A
A
R
R
R
N
N
N
Annual Report 2023 Stelrad Group plc 59
Skills matrix
Under The 2018 Corporate Governance Code, the Board and its Committees should have a combination of skills, experience
and knowledge. Below is a skills matrix which includes capabilities that should be covered by the Board as a whole. These
capabilities are standard capabilities which are reviewed by the proxy agencies including ISS and Glass Lewis. The skills matrix
below provides a visual representation of the Directors’ skills.
Director
Capabilities
1.
Radiator
manufacturing
2.
Financial/audit
and risk
3.
Leadership
and people
4.
Strategy
5.
Listed PLC
and governance
6.
ESG
7.
Capital
markets
8.
Tech and
digital
9.
Legal/
regulation
Bob Ellis
Trevor Harvey
Annette Borén
Katherine Innes
Ker
Nicola Bruce
Martin Payne
Edmund
Lazarus
Nicholas
Armstrong
Stelrad Group plc Annual Report 202360
GOVERNANCE REPORT
Board of Directors continued
Compliance with the Code
The Board is committed to the highest standards of corporate
governance. Since admission, we have complied with the
2018 UK Corporate Governance Code (the “Code”) except in
the following areas:
Board composition
At least half the board, excluding the chair, should be
non-executive directors whom the board considers to
beindependent
During the year ended 31 December 2023, the Board has
been composed of eight members. The Directors regard
only three of the Non-Executive Directors as independent.
The Company therefore does not comply with the Code
recommendation that at least half the board, excluding
the chair, should be non-executive directors whom the
board considers to be independent. Two of the current
Non-Executive Directors are representatives of the Major
Shareholder as a condition of the Relationship Agreement.
Although the number of Non-Executive Directors on the
Board who are not considered to be independent is expected
to reduce over time, with reductions in the shareholding
of the Major Shareholder leading to adjustment of the
conditions set by the Relationship Agreement, the Board
also continues to consider potential recruitment of additional
independent Directors as part of Board succession planning.
Independent chair
The chair should be independent on appointment
The Code recommends that the chair of a company should
be independent on appointment when assessed against the
circumstances set out in the Code. The Chair, Bob Ellis, has in
the past held, and continues to hold, various positions with
portfolio companies owned by affiliates of The Bregal Fund
III LP, the Company’s Major Shareholder, and was initially
appointed as a Non-Executive Director of the Group in 2009.
By virtue of holding these positions with portfolio companies
owned by affiliates of the Major Shareholder and taking into
account Mr Ellis’ tenure as a Non-Executive Director, the
Board does not consider that the Chair should be viewed
as being independent on appointment by reference to the
independence criteria set out in the Code. However, in view of
the Chair’s involvement with the Group over the last 14 years,
and as Chair since 2013, the Board continues to consider that
he has made, and will continue to make, a major contribution
to the Group’s growth and success, and in looking at the
year ahead is unanimously of the opinion that his continued
involvement as Chair will help to ensure the ongoing success
of the Company.
A copy of the Code can be found at www.frc.org.uk.
Role of the Board and its Committees
Board
The role of the Board is to set and monitor the Group’s
purpose and strategy in order to promote sustainable growth
and the long-term success of the business and, in doing so,
generate value for the shareholders. It is the responsibility
of the Board to ensure that the strategy of the business is in
alignment with the culture and values of the organisation. The
Board is also responsible for taking into account the views and
interests of all stakeholders, including the wider community,
through engagement with a wide range of stakeholders.
The Board, supported by the Audit & Risk Committee, is
responsible for the Group’s systems of internal control and
risk management and for ensuring that these systems of
governance are strong and effective. The Board also sets the
risk appetite of the Group.
The Board’s main responsibilities are included in a schedule of
matters reserved for the Board, as set out below:
• strategic matters – responsibility for the overall leadership
of the Group and setting and monitoring the Group’s
strategy, values and standards;
• structure and capital – approving or recommending any
changes relating to the Group’s capital structure;
• financial reporting and controls – approving the Group’s
annual financial statements and reports, and approving
the Group’s business plan, budget and forecasts;
• agreements – approving major capital projects,
investments, contracts and lending or borrowing by the
Group (outside of the treasury policy);
• communications with shareholders – ensuring an effective
engagement strategy with shareholders;
• Board appointments and remuneration – approving
changes to the structure, size and composition of
the Board;
• risk assessment and internal controls – ensuring the
maintenance of sound systems of internal control and risk
management, and monitoring these systems; and
• corporate governance – reviewing the Company’s overall
corporate governance arrangements and assessing and
monitoring the Group’s culture.
The membership of the Board is detailed below:
• a Non-Executive Chair;
• two Executive Directors;
• three independent Non-Executive Directors, including a
Senior Independent Director; and
• two Major Shareholder Representative Directors.
The Directors of the Company who were in office during the
year and up to the date of signing the financial statements
are detailed on pages 58 and 59.
On 22 November 2023, George Letham retired from the
Board and Annette Borén was appointed to the Board.
On31December 2023, Terry Miller resigned from the Board.
On 1 February 2024, Katherine Innes Ker was appointed to
the Board.
As envisaged by the Code, the Board has established an
Audit & Risk Committee, a Nomination Committee and a
Remuneration Committee, each with formally delegated
duties and responsibilities with written terms of reference.
The Committees play an essential role in supporting the
Board and provide focused oversight of key aspects of the
business. A summary of the membership and responsibilities
of each Committee is detailed in this report. The full terms of
reference for each Committee are available on the Company’s
website, www.stelradplc.com.
Annual Report 2023 Stelrad Group plc 61
Statement of corporate governance
Key roles of the Board
The roles and division of responsibilities between the Chair,
Chief Executive Officer and Senior Independent Director have
been clearly defined and agreed by the Board. A summary
ofthe key roles and responsibilities is given below:
Chair
• Responsible for the leadership of the Board, promoting
aculture of openness and debate.
• Promotes the highest standards of integrity, probity
andcorporate governance, in line with best practice.
• Sets the Board agenda, ensuring it has a focus on
strategy,performance, value creation, culture, stakeholders
and accountability.
• Oversees the development, induction and performance
evaluation of each Director.
• Ensures that Directors receive accurate, timely, high-quality
and clear information on the basis of which they can make
sound decisions.
• Ensures that the Board listens to the views of shareholders,
the workforce, customers and other key stakeholders
by ensuring effective communication with them in
order to understand their issues and concerns, and by
communicating issues to the Board.
Chief Executive Officer
• Responsible for the leadership of the business.
• Works closely with the Chair and the Board to propose,
develop and implement the Company’s strategy.
• Represents the Company and oversees and manages all
business activities, operations and performance of the
Group within the authority delegated by the Board.
• Leads the senior management team of the Group in the
day-to-day running of the business.
• Regularly reviews the Group’s operational performance
and strategic direction and reports accurately in agreed
formats to the Board and the Committees.
• Monitors and maintains high standards of
corporategovernance.
• Manages the Group’s risk profile in line with the extent
andcategories of risk identified as acceptable by the Board
and the Audit & Risk Committee.
Audit & Risk Committee Nomination Committee Remuneration Committee
Responsibility for oversight of
the Group’s financial reporting,
internal controls, risk management
and relationship with the
external auditors.
Responsibility for the composition
of the Board and Committees of
the Board including succession
planning and ongoing review
ofdiversity policies.
Responsibility for the Remuneration
Policy, setting individual
remuneration levels for Executive
Directors and the Chair, and
aligning workforce remuneration
and related policies with the
Group’s strategy and culture and
the requirements of the Code.
Members:
• Three independent
Non-Executive Directors –
Martin Payne (Chair), Terry Miller
(resigned 31 December2023),
Katherine Innes Ker (appointed
1February 2024) and
Nicola Bruce
Members:
• Three independent
Non-Executive Directors –
Terry Miller (Chair) (resigned
31 December 2023), Katherine
Innes Ker (Chair) (appointed
1February 2024), Martin Payne
and Nicola Bruce
• One Major Shareholder
Representative Director –
Edmund Lazarus
Members:
• Three independent Non-Executive
Directors – Nicola Bruce (Chair),
Terry Miller (resigned 31 December
2023), Katherine Innes Ker
(appointed 1February 2024)
andMartin Payne
» The Audit & Risk Committee Report can
be found on page 65
» The Nomination Committee Report can
be found on page 70
» The Remuneration Committee Report
can be found on page 74
Board activities and priorities during 2023
During the year ended 31 December 2023, the Board
has met nine times, seven of which were scheduled.
Thefollowing areas have been discussed during the year:
• health and safety;
• ESG strategy, sustainability and TCFD requirements;
• Radiators SpA update;
• approval of 2022 Annual Report, 2023 Interim
Statement and trading updates;
• dividend approval;
• 2023 budget approval;
• 2022 annual bonus approval and the total remuneration
outcome for Executive Directors and senior management;
• loan facility extension approval;
• Directors’ induction and training plan;
• Board evaluation;
• Board and senior management succession planning;
• appointment of a new Chief Financial Officer;
• Group strategy day;
• Group restructuring appraisal;
• review of Financial Reporting Council letter;
• risk management and risk register;
• investor relations update;
• European steel market update; and
• Group policy review.
Stelrad Group plc Annual Report 202362
GOVERNANCE REPORT
Statement of corporate governance continued
Senior Independent Director
• Provides a sounding board to the Chair and supports
theChair in the delivery of their objectives.
• Appraises the Chair’s performance.
• Acts as an intermediary between the Chair and the other
Directors, when necessary.
• Available to shareholders if they have concerns which have
not been resolved through the normal channels.
Governance report
Board meetings and attendance
The Board held seven scheduled meetings during the year
ended 31 December 2023. The table below sets out the
attendance of each Director versus the maximum number
ofscheduled meetings they could have attended during the
year ended 31 December 2023.
Board
Audit & Risk
Committee
Nomination
Committee
Remuneration
Committee
Trevor Harvey 7/7 — — —
Annette Borén 1/1 — — —
George Letham 6/6 — — —
Bob Ellis 7/7 — — —
Terry Miller 7/7 3/3 4/4 5/5
Martin Payne 7/7 3/3 4/4 5/5
Nicola Bruce 7/7 3/3 4/4 5/5
Edmund Lazarus 3/7 
(1)
— 1/4 
(2)
—
Nicholas
Armstrong 6/7 
(1)
— — —
(1) Edmund Lazarus and Nicholas Armstrong were unable to attend
anumber of meetings due to pre-existing commitments.
(2) Bob Ellis attended the four Nomination Committee meetings during
theyear as an alternate Committee member for Edmund Lazarus.
Additional ad-hoc meetings were also held during the year
in respect of changes to the composition of the Board and
strategic matters.
Appointment and election
On 22 November 2023, George Letham retired from the
Board and Annette Borén was appointed to the Board.
On31December 2023, Terry Miller resigned from the Board.
On 1 February 2024, Katherine Innes Ker was appointed to
theBoard. There has been no other change to the composition
of the Board during the year ended 31December 2023 or up
to the date of signing the financial statements.
The Board is satisfied that all Directors are effective and
committed to their roles and have sufficient time available
to perform their duties. In line with the Code and the
Company’s Articles, all of the Directors will be subject to
annual re-election. Therefore, all members of the Board will
be standing for election at the 2024 Annual General Meeting
to be held on 22 May 2024.
Board induction
Details of the Board induction can be found in the
Nomination Committee Report on pages 70 to 73.
Board evaluation
The Board completed its annual Board and Committee
evaluation in autumn 2023. This was the Board’s second
Board evaluation following the listing on the London Stock
Exchange in October 2021. Following the previous year’s
evaluation, a number of actions were implemented, including
a regular cadence of ESG reporting to the Board and the
appointment of Annette Borén as Chief Financial Officer in
November 2023.
Overall, the results confirmed that the Board and its
Committees were operating effectively. Following review
by the Nomination Committee, the findings have been
presented to the Board to agree actions for addressing the
recommendations of the evaluation. In summary, key areas
offocus identified by the evaluation include:
• further succession planning for senior management
andthe Board;
• ESG strategy development; and
• stakeholder engagement.
» Read more about our Board evaluation on page 72
Board effectiveness review
In line with the Code, the Board reviewed its own effectiveness
and that of its Committees during 2023. The 2023 Board
evaluation was internally facilitated by the Chair of the
Nomination Committee in conjunction with the Company
Secretary, and it was conducted during August 2023 using
an online questionnaire which each Director was asked to
complete, with specific reference to individual Board and
Committee responsibilities. The completed questionnaires
were then collated, and the responses reviewed by the Chair
of the Nomination Committee and Company Secretary.
The findings of the 2023 evaluation exercise confirmed that
overall the Board and its Committees continued to operate
effectively during the year. The Nomination Committee will
consider the findings and develop proposals for action by the
Board to address recommendations arising from the evaluation.
With respect to individual performance assessment, the Senior
Independent Director provided a performance assessment
to the Chair following a session with all Board members
(excluding the Chair) and the Company Secretary. An annual
performance assessment of each Non-Executive Director
is carried out to ensure that performance, contribution,
commitment and any training and development needs
areaddressed.
Non-Executive Director independence
The Non-Executive Directors bring a broad range of skills
andexperience to Stelrad Group plc, and they are qualified
to provide constructive challenge in Board discussions,
where needed, and considered insights to refine the strategy
of the Group over the coming years. The independence
of the Non-Executive Directors is reviewed as part of an
annual Board evaluation process. As previously stated within
the statement of corporate governance, the Board does
not currently comply with the requirements of the Code
in relation to majority of independence of the board and
the independence of the chair on appointment. Three of
the Non-Executive Directors – the two Major Shareholder
Representative Directors and the Chair – are notindependent.
Under the meaning of independence within the Code, the
Company regards the three independent Non-Executive
Directors as independent and free from any business or other
relationship that could materially interfere with the exercise
oftheir independent judgement.
Annual Report 2023 Stelrad Group plc 63
Governance report continued
Time commitment
All Non-Executive Directors are required to devote
appropriate time to meet their Board responsibilities
and demonstrate commitment to their role. The time
commitment of each Non-Executive Director was
considered prior to their appointment to determine that
it was appropriate. The Non-Executive Directors’ letters
of appointment contain information in relation to the
time commitment expected of each Director in their role.
Directors’ external time commitment is regularly reviewed
to ensure Directors can allocate the necessary time and
effort to the Company. This process is continually managed
by the Company Secretary and the Chair and takes into
consideration outside appointments and commitments.
The Board has concluded that, notwithstanding Directors’
other appointments, they are each able to dedicate sufficient
time to fulfil their duties and obligation to the Company.
Directors’ conflicts of interest
The Group has a formal ongoing procedure for the disclosure,
review and authorisation of Directors’ conflicts of interest.
All Directors are required to make the Board aware of any
other commitments. Potential and actual conflicts of interest
are carefully considered and, if deemed appropriate, the
continuing existence of the potential or actual conflict of
interest may be approved by the Board. All conflicts of interest
are recorded in the conflicts register. The conflicts of interest
are reviewed annually to determine whether they should
remain authorised.
Internal control and risk management
The Board, supported by the Audit & Risk Committee, is
responsible for the Group’s systems of internal control and
risk management and for ensuring that these systems of
governance are strong and effective.
Details of how the Audit & Risk Committee reviews and
assesses the effectiveness of the system of internal control
can be found in the Audit & Risk Committee Report on pages
65 to 69. The Board understands that systems of internal
control can only manage, and not eliminate, risk, and that
they are designed to provide reasonable, and not absolute,
assurance against material misstatement or loss.
The Board is responsible for the oversight of the risk
management process, which involves reviewing the
processes in place to calculate and manage risk effectively.
The Board is also responsible for setting the risk appetite
of the Group and acknowledges its responsibility for
determining the extent of the risks it is willing to take in
achieving its strategic objectives. The Board regularly reviews
the principal risks facing the Group and the mitigation
measures for each risk which are set out on pages 50 to 54.
Whistleblowing
The Group has a whistleblowing policy in place and a
whistleblowing contact email address is available to enable
employees to raise any legitimate concerns which they
feel need to be brought to the attention of management
concerning any wrongdoings within their workplace. The
Group believes that it is important to have a culture of
openness to prevent such situations occurring or to bring
them to the attention of management when they do occur.
Information and support
The information presented to the Board is clear, accurate
and timely, and intended to enhance Board effectiveness.
Acomprehensive Board procedures manual is maintained
in the online Board portal, to which all Directors have access.
The standing information held there includes Board and
Committee terms of reference, the duties and responsibilities
of Directors, including standards of conduct and compliance,
and training documents. The Board and Committee papers
are also posted in the online Board portal.
All Directors have access to the advice and services of the
Group Company Secretary, who can specifically advise
them on governance matters. The Directors may also take
independent professional advice at the Group’s expense
when it is judged necessary to perform their duties effectively.
Business ethics
The Group’s core values and principles, and the standards
of behaviour which every employee across the Group is
expected to uphold, are set out in the Stelrad Group plc
Code of Conduct. These values and principles are applied
todealings with our employees, customers and suppliers
andall other stakeholders of the business.
The Group has anti-corruption and bribery policies which
are communicated to all employees through business units’
intranets and readily available from the respective Human
Resources departments. The policy is prepared in light of
the UK Bribery Act 2010 and describes the legal framework
applicable to the business as well as standards and policies
tobe adhered to by employees. In addition, training courses
are provided locally.
The Group is opposed to modern slavery and human
trafficking and will only work with organisations which
formally commit to the Group’s ethical trading policy.
TheBoard has approved the modern slavery statement which
can be found on the Group’s website at www.stelradplc.com.
Equality, diversity and inclusion
The Group has both an Equality, Diversity and Inclusion
Policy and a Diversity and Inclusion Policy for the Board.
TheDiversity and Inclusion Policy for the Board aims to
ensure that diversity and inclusion will be considered in all
future Board appointments so that the Board membership
reflects a broad combination of factors such as diversity
of gender, age, educational and professional background,
social,ethnic and geographical background, and cognitive
and personal strengths. The Diversity and Inclusion Policy
forthe Board is detailed on page 71.
More details can be found in the Nomination Committee
Report on pages 70 to 73 where the Board diversity
disclosures required by the FCA Listing Rules are disclosed.
Succession planning
Succession planning, both for the Board and for senior
management, has been a major focus over the past year.
Details of the Nomination Committee’s consideration
of succession planning can be found in the Nomination
Committee Report on pages 70 to 73.
Stelrad Group plc Annual Report 202364
GOVERNANCE REPORT
Statement of corporate governance continued
Overseeing financial reporting
and risk management
Highlights of 2023
• Completion of the 2022 Annual Report.
• Development of a formal process for external auditor
and internal auditor review.
• Completion of the review of financial controls in
the Group’s business units utilising internal audit,
including the most recent acquisition, Radiators SpA.
• Continued development of the Group’s risk management
framework, including the incorporation of a climate
risks and opportunities register and the incorporation
of relevant KPIs into the risk register.
• Consideration of the Group’s cyber security risks and
the Group’s approach to such risks, culminating in the
appointment of cyber security consultants.
• Continued development of the Group’s TCFD reporting.
• Review of currency risk management policies.
Focus areas for 2024
• Continued development of the Group’s internal audit
approach and plan.
• Review of the 2023 Annual Report.
• Preparation for potential new environmental reporting
and auditing requirements.
• Continued focus on cyber security risk.
• Induction of new Chief Financial Officer.
Committee members
Martin Payne (Chair)
Nicola Bruce
Terry Miller (resigned
31December 2023)
Katherine Innes
Ker (appointed
1February 2024)
During the year we have
continued to review, challenge
and improve the risk control
framework throughout the Group.
Martin Payne
Chair of the Audit & Risk Committee
Dear shareholders
As Chair of the Audit & Risk Committee, I am pleased to
introduce the Committee’s report, which provides a summary
of the Committee’s role and activities for the financial year
ended 31 December 2023.
The Committee plays a vital role in delivering the Company’s
corporate governance obligations, by overseeing the
accounting, financial reporting and internal control and risk
management processes, and providing valuable independent
challenge where required.
As well as detailing the composition and remit of the Committee,
this report will also outline how the Committee operates;
give an appraisal of the external auditors and auditors’
effectiveness; and provide an overview of the Group’s internal
control environment and risk management framework,
including the Committee’s assessment of its effectiveness.
During the year, George Letham retired from his position as
Chief Financial Officer and stepped down from the Board.
Iwould like to record the Committee’s thanks to George for
his valuable support and input since IPO, and we wish him
well for the future. Annette Borén joined the Group as Chief
Financial Officer on 1 November 2023 and was appointed to
the Board on 22 November 2023 and the Committee looks
forward to working with her in the years to come, and will play
its part in her induction process.
Committee composition
The Committee has comprised three independent Non-Executive
Directors during the year ended 31 December 2023: Nicola Bruce,
Terry Miller and Martin Payne as Committee Chair. TheMajor
Shareholder is entitled to nominate an observer to the Audit
& Risk Committee and has exercised its right to do this
during the year.
The membership of the Committee was selected with the
aim of providing the range of financial, commercial and
sector expertise necessary to meet the responsibilities of
theCommittee and the requirements of the Code.
Going forward, the Committee will keep its composition
under review to ensure it remains appropriate. The Board
believes that the Committee has the competence and
experience that are relevant to the sector in which the
Company operates. The Board is also satisfied that Martin
Payne, a Chartered Management Accountant and a former
finance director, has recent and relevant financial experience
and he has been designated as the financial expert on the
Committee for the purposes of the Code.
Details of the Directors’ experience and skill sets can be found
in the Director biographies on pages 58 to 60.
Annual Report 2023 Stelrad Group plc 65
Audit & Risk Committee Report
Committee remit
The key responsibilities of the Committee are:
• reviewing and monitoring the integrity of the Group’s
annual and interim financial statements, and reviewing
the significant financial reporting judgements made in
connection with their preparation;
• reviewing the content of the Annual Report and advising
the Board on whether, taken as a whole, it is fair, balanced
and understandable;
• monitoring and reviewing the adequacy and effectiveness
of the Company’s internal financial controls and internal
control and risk management systems;
• overseeing and maintaining an appropriate relationship
with the Company’s external auditors and reviewing
the independence, objectivity and effectiveness of the
audit process;
• ensuring that internal audit arrangements are appropriate
and effective; and
• ensuring that fraud prevention and whistleblowing
arrangements are established which minimise the
potential for fraud and financial impropriety.
Further details on the remit and responsibilities of the
Committee can be found in its terms of reference. The terms
of reference, which are reviewed annually and approved by
the Board, can be found on our website, www.stelradplc.com.
How the Committee operates
The Committee schedules its meetings to align with the key
dates in the Company’s financial calendar. The dates of the
meetings have been set using a structured forward planner,
developed in conjunction with the Company Secretary, to
ensure it is able to devote sufficient time to discussing and
debating the key matters within its remit and discharge
its responsibilities in full. Additional meetings are held
as required where there are specific areas of judgement
to discuss. During the year ended 31 December 2023, an
additional Committee meeting was held to consider a letter
from the Financial Reporting Council (“FRC”). Further details
on the response to the FRC letter can be found later in
this report.
The Committee will meet at least three times per annum.
The external auditors, PricewaterhouseCoopers LLP, are
invited to attend each meeting together with the Chair of the
Board, the Chief Financial Officer, the Group Finance Director
and the Company Secretary. The Committee Chair will also
update the Board following each meeting.
The Committee also sets time aside at each meeting to
seek the views of the external auditors, in the absence of
management. In between meetings the Committee Chair
keeps in touch with the Chief Financial Officer and other
members of the management team.
During 2023 the Board undertook a review of its own
effectiveness which included the effectiveness of the
Committee. This review concluded that the Committee was
operating effectively. For more details please see page 63.
2023 Committee activities
The Committee held three scheduled meetings during the
year ended 31 December 2023, and key areas covered at the
meetings of the Committee were:
• review of external auditors’ and internal auditors’ effectiveness;
• consideration of the relevant elements of the Group’s 2022
Annual Report, including the key accounting judgements
and the going concern and viability statement, and of the
2023 Interim Statement;
• review of proposed dividend and assessment of
distributable reserves;
• consideration of the risk management framework and of
the Group risk register, including the approval of a climate
risk and opportunity register and the incorporation of
relevant KPIs into the risk register;
• review of the letter from the FRC in respect of the Annual
Report and Accounts for the year ended 31 December 2022
and review of the response to the FRC;
• consideration of the Group’s cyber security risks and
the Group’s approach to such risks, culminating in the
appointment of cyber security consultants; and
• review of the 2023 internal audit reports, undertaken by Grant
Thornton UK LLP, covering financial controls at the Group’s
business units and review of the 2024 internal audit plan.
IAS 21 – functional currency
On 1 January 2023, the functional currency of the Group’s
Turkish business was changed from Turkish Lira to Euro.
Further details on the changes to the relevant underlying
transactions, events and conditions that led the Directors
to consider whether the functional currency for the Turkish
business should be changed are outlined in note 5 of the
consolidated financial statements. Note 5 of the consolidated
financial statements also includes the analysis of the functional
currency of the Turkish business, by reference to the key
indicators outlined in IAS 21 The Effects of Changes in Foreign
Exchange Rates, which led the Directors to confirm that the
functional currency of the Turkish business is Euro.
The Committee met during the year ended 31 December
2022 to consider the analysis of the functional currency of the
Turkish business.
FRC review
Stelrad Group plc received a letter from the FRC in respect
of its review of the Annual Report and Accounts for the
year ended 31 December 2022. The FRC requested further
information in respect of our approach to accounting for
the effects of hyperinflationary economies and our use of
alternative performance measures. We responded to the FRC
letter within the timescale provided, following an in-depth
review of the letter and the response by senior management,
the Audit & Risk Committee, the Board and the external
auditors. We have now received notification that its enquiries
have been closed.
The FRC’s role is to consider compliance with reporting
standards and is not to verify the information provided to
it. Therefore, given the scope and inherent limitations of its
review, which does not benefit from any detailed knowledge
of the Group, it would not be appropriate to infer any assurance
from its review that our 2022 Annual Report and Accounts
was correct in all material respects.
Stelrad Group plc Annual Report 202366
GOVERNANCE REPORT
Audit & Risk Committee Report continued
The findings from the enquiry have led to the Group making
improvements to its disclosure of alternative performance
measures (“APMs”) in the Annual Report and Accounts for the
year ended 31 December 2023. These improvements include
giving equal prominence to IFRS measures in the Strategic
Report, reconciling all APMs and including an explanation
about the limitations of the Group’s APMs.
The Group’s response to the FRC’s request for further
information in respect of our approach to accounting
for the effects of hyperinflationary economies resulted in
one amendment being made to a line item title in the
consolidated statement of cash flows, with the line item
“monetary loss IAS 29 income statement element” being
retitled “IAS 29 – inflation adjustment before taxation”.
Financial reporting review
A key requirement of the financial statements is that they are
fair, balanced and understandable. In reaching a judgement as
to whether this is the case, the Annual Report is reviewed and
assessed by the Committee. The Committee considers that
the 2023 Annual Report is fair, balanced and understandable
in terms of the form and content of the strategic, governance
and financial information presented therein.
The Committee also ensured that it followed the guidance
received in respect of the use of alternative performance
measures highlighted in the FRC review of the 2022 Annual
Report and Accounts.
Significant issues and other
accountingjudgements
The Committee reviewed the integrity of the Group’s financial
statements and all formal announcements relating to the
Group’s financial performance. This included an assessment
of each critical accounting policy, as set out in note 5 to the
financial statements, as well as review of the following key
areas of judgement and areas of audit risk:
Functional currency
On 1 January 2023, the functional currency of the Turkish
business changed from Turkish Lira to Euro.
The Committee reviewed the Directors’ assessment of the
changes to the relevant underlying transactions, events and
conditions that had led the Directors to consider whether
the functional currency for the Turkish business should
be changed. The Committee also reviewed the Directors’
analysis of the primary and secondary indicators outlined in
IAS 21 The Effects of Changes in Foreign Exchange Rates that
was undertaken during the year ended 31 December 2022.
Further details can be found in note 5.
Accounting for business combinations
The Committee reviewed the key judgements involved in
the accounting for business combinations arising from the
acquisition of Radiators SpA.
Impairment of non-financial assets
The Committee reviewed the impairment assessment of
intangible assets, including goodwill, in Radiators SpA.
TheCommittee also reviewed the key judgements used.
Revenue recognition and indirect rebates
In conjunction with the annual audit, the Committee
continued to review key judgements in respect of revenue
recognition and indirect rebate provisions.
Going concern and long-term viability
The Committee has reviewed the Group’s going concern and
long-term viability disclosures in this Annual Report, along
with supporting documents, and advised the Board on their
appropriateness. More detail on these disclosures can be
found on page 55 of the Strategic Report. As part of its review,
the Committee considered the appropriateness of the “severe
but plausible” downside scenario modelled by the business,
especially considering the potential ongoing impact of the
current economic situation.
External auditors and audit effectiveness
PricewaterhouseCoopers LLP (“PwC”) were appointed as the
auditors of Noosa Holdings Jersey Limited, which was the
parent company of the Group prior to the Group’s listing,
in 2017, and were subsequently appointed as auditors of
the Company.
For the financial year ending 31 December 2024, the
Committee has recommended to the Board that PwC be
reappointed as external auditors and the Company will be
seeking shareholder approval for the reappointment of PwC
at its AGM to be held in May 2024.
The current lead audit partner, Paul Cheshire, was appointed
in 2022. Current professional standards require a lead partner
to be rotated every five years.
The Committee has no current plans to re-tender the audit
inthe foreseeable future.
In assessing the independence of the auditors from the
Group, the Committee has been provided with information
and assurances that all of the auditors’ partners and staff
involved with the audit are independent of any links to the
Group. The Committee has reviewed, and is satisfied with, the
independence of PwC as the external auditors.
Subsequent to the year end, the Committee assessed the
effectiveness of PwC and the external audit process for 2023
through discussions with senior members of management
across the Group who had been involved in the audit process.
A summary of the findings was prepared for consideration by
the Committee and PwC.
There were no substantive matters identified during this
assessment and the Committee concluded that the external
audit process for 2023 had been effective.
The Committee reviewed PwC’s findings in respect of
the audit of the financial statements for the year ended
31 December 2023. The Committee met separately with
the auditors without management present and with
management without the auditors present, to ensure
that there were no issues in the relationship between
management and the external auditors which it should
address. No matters were raised.
Non-audit services
A policy governing the provision of non-audit services is in
place in order to ensure the independence of the external
auditors. Non-audit services should not be carried out by the
external auditors where doing so would compromise their
independence. The provision of non-audit services by the
external auditors must always be approved by the Board,
either by specific pre-approval or on a case by case approval
basis. In deciding whether the external auditors should be
appointed to carry out any non-audit services, the following
areas should be taken into consideration:
Annual Report 2023 Stelrad Group plc 67
Non-audit services continued
• the skills and experience of the external auditors to
perform the required services;
• the effect of the non-audit services on the audited
financialstatements;
• the potential impact of each project on the external
auditors’ independence and objectivity; and
• the resulting ratio of non-audit to audit fees.
In 2023, PwC received total fees of £474,000 (2022: £440,000)
comprising £430,000 of audit fees (2022: £398,000) and
£44,000 of non-audit service fees (2022: £42,000). The fees for
non-audit services during the year ended 31 December 2023
and the year ended 31 December 2022 include:
• in 2023, £36,000 related to interim review fees and £8,000
related to bank covenant reporting; and
• in 2022, £35,000 related to interim review fees and £7,000
related to bank covenant reporting.
Further details of fees paid to PwC are set out in note 8 to the
financial statements.
Internal control framework
The day-to-day management of our principal risks is supported
by an internal control environment which is embedded in our
management and operational processes. The most significant
elements of the Group’s internal control environment include
the following:
Communication of policies and procedures
The Group has documented policies and procedures
underpinning its key business and finance processes.
Policiesand procedures documents are held at both Group
and business unit level, with more detailed documents held
at a business unit level to support the local conditions.
During the year ended 31 December 2023, the Group has
updated and broadened its Group policies, including the
introduction of an environmental policy, an information
security policy and a sustainable procurement policy. The
Group will continue to build upon and improve its Group
policies in future years as required.
Promoting a culture of honesty and ethical behaviour
The Group educates new staff on the values and culture of
the business through employee handbooks and induction
training sessions. The content and structure of the employee
handbooks vary across the business units to support local
conditions. Areas covered include terms of employment
andhealth and safety.
In addition to the local employee handbooks, the Group
maintains complementary key policies and procedures
for HR, anti-corruption and bribery, modern slavery
andwhistleblowing.
Monitoring and oversight by those charged
withgovernance
There are a number of operational controls in place which
facilitate the Executive Directors’ monitoring of the Group’s
financial performance and position. In addition, business
process controls are in place for the key operational cycles.
The Group has a documented organisational structure that
clearly specifies roles and reporting lines for all business units
and departments within the Group. The reporting line to
the Board is through the Chair, Chief Executive Officer and
Chief Financial Officer. There is frequent interaction between
the Chief Executive Officer and Chief Financial Officer and
business unit management teams.
Segregation of duties
Appropriate segregation of duties has been put in place
across the Group.
Risk management
Overall responsibility for risk management lies with the
Board, supported in its role by the Audit & Risk Committee,
which has been delegated the responsibilities of reviewing
the risk management methodology and the effectiveness
ofinternal control.
The Group has in place a risk management framework,
underpinned by the use of business unit and Group level risk
registers, which clearly documents procedures to ensure risks
to the organisation are identified, reported and reassessed
onan ongoing basis.
In addition to the assurance provided by the formal risk
management framework, the Executive Directors are very
involved in the day-to-day running of the business and have
overview of potential risks in the business units.
The Group continually assesses and monitors the impact
of the most significant risks. Where necessary, mitigating
actions are put in place to reduce the likelihood or impact
ofsuch risks to an acceptable level.
The Group’s risk appetite is largely risk averse. However, the
Group Board accepts that, in order to achieve its strategic
objectives and generate suitable returns for shareholders,
itmust accept, and manage, a certain level of risk.
Internal audit
During the year ended 31 December 2022, the Board agreed
with the Audit & Risk Committee recommendation that external
providers should be engaged to deliver the Group’s internal
audit. Grant Thornton UK LLP were engaged and an initial
programme of internal audit activities was put in place. The
programme began in the year ended 31 December 2022, and
reviews were undertaken covering cyber risk assessment
across the Group and key financial controls reviews in the
UK. During the year ended 31 December 2023, internal audit
reviews have been undertaken covering key financial controls
review at our other significant sites in Turkey, Continental
Radiators and Italy.
The internal auditors will also follow up on any previous
recommendations and their implementation. Following
thecompletion of the key financial controls reviews, the
internal auditors have proposed a risk-based internal
auditplan. The risk-based internal audit plan was reviewed
and approved and will commence in quarter two 2024.
Stelrad Group plc Annual Report 202368
GOVERNANCE REPORT
Audit & Risk Committee Report continued
Internal audit effectiveness
The Committee reviewed the effectiveness of the internal
audit process during the year using a formal questionnaire-
based approach, undertaken as a Committee exercise during
the November Committee meeting. No matters were raised.
Management ensures that the provider of internal audit
services is appropriately qualified to audit the risk area
beingconsidered.
Fraud, whistleblowing and the UK Bribery Act
The Committee recognises the importance of effective
whistleblowing policies as being an additional tool to
strengthen governance, by ensuring a reliable system is
in place to identify and correct any unlawful or unethical
conduct. The Committee monitors any reported incidents
under the Group’s whistleblowing policy, which is explained
in more detail on page 64 of the statement of corporate
governance. There were no incidents during the year
which were required to be brought to the attention of
theCommittee.
The Committee also reviews the Group’s procedure for
detecting fraud and the systems and controls in place to
prevent a breach of anti-bribery legislation. The policy is
explained in more detail on page 64 of the statement of
corporate governance. There were no breaches during the
year which were required to be brought to the attention of
the Committee.
Martin Payne
Chair of the Audit & Risk Committee
8 March 2024
During the year ended 31 December 2024, risk-based audits
are planned covering IT general controls and treasury and
cash management, as well as follow up on previous reviews,
including cyber risk. Although the risk-based internal audit
plan has been approved, the Committee will continue to
review emerging risks and amend the existing plan if they
consider this to be necessary.
Assessment of the Group’s system of internal
control and risk management framework
The risk assessment process within the Group and the
management of significant business risks is a key area of
focus for the Committee. The Committee’s undertakings
with regard to risk assessment have focused on the key risks
identified by the Group and the actions it had put in place to
address these – as described in the Risk Management section
of the Strategic Report on pages 48 to 54.
The Group’s internal control environment is designed to
protect the business from the material risks which have
been identified. Management is responsible for establishing
and maintaining adequate internal controls over financial
reporting and the Committee has responsibility for ensuring
the effectiveness of these controls.
The internal auditors, Grant Thornton UK LLP, will contribute
to the review of the internal control environment.
In accordance with the requirements of the Code, the Committee
confirms it has reviewed the Group’s risk management
framework and internal control environment. No significant
failings or weaknesses were identified as a result of the review
that may significantly impact the financialstatements.
Annual Report 2023 Stelrad Group plc 69
Focused on Board effectiveness
and succession planning
Highlights of 2023
• Undertook the Board and Committee evaluation
process, including a review of the current year outcomes
and an update of the recommendations from the
prior year process, with continuing focus on actions to
address recommendations and enhance effectiveness.
• Review of Board and senior management
succession planning.
• Oversight of the Chief Financial Officer recruitment
and appointment processes.
Focus areas for 2024
The Committee will focus on overseeing actions to
address the outcomes of the Board evaluation, including:
• Review of long-term succession planning for the
Board and senior management, including overseeing
efforts to enhance diversity and inclusion.
• Review of the Board skills matrix and the roles and
responsibilities of Directors to ensure that the Board
has the right mix of skills, experience and knowledge.
• Continuing development of the ESG strategy.
• Enhancing shareholder engagement across a wider
investor community.
Committee members
Katherine Innes Ker
(Chair) (appointed
1February 2024)
Terry Miller
(Chair) (resigned
31December 2023)
Martin Payne
Nicola Bruce
Edmund Lazarus
In 2023, the Nomination
Committee oversaw the
recruitment of the Group’s
newChief Financial Officer.
Katherine Innes Ker
Chair of the Nomination Committee
Dear shareholders
I am pleased to present the Nomination Committee Report of
Stelrad Group plc for the year ended 31 December 2023. This
report summarises the activities of the Committee during the
year and examines the future focus areas of the Committee.
I was appointed Chair of the Committee on joining the Board
on 1 February 2024. I would like to thank Terry Miller for her
leadership and guidance during her tenure, which included
the successful appointment of the new Chief Financial
Officer, Annette Borén, in November 2023.
Nomination Committee composition
The Committee’s membership is detailed on page 62, and
information on the Directors’ experience and skill sets can
be found in their biographies and the Board skills matrix
on pages 58 to 60. At the financial year end, the Committee
comprised a majority of independent Non-Executive
Directors, complying with provision 17 of the 2018 Code.
Nomination Committee remit
The key responsibilities of the Nomination Committee are:
• to assist the Board in discharging its responsibilities
relating to the composition and make-up of the Board
andany Committees of the Board;
• to periodically review the Board’s structure and identify
potential candidates to be appointed as Directors or
Committee members as the need may arise;
• to evaluate the balance of skills, knowledge and experience
and the size, structure and composition of the Board
and Committees of the Board, and retirements and
appointments of additional and replacement Directors
and Committee members, and to make appropriate
recommendations to the Board on such matters;
• to assist the Chair in the annual evaluation of the Board’s
performance and to review the results relating to Board
composition and performance;
• to put in place plans for the orderly succession of appointments
to the Board and to senior management and to oversee
the development of a diverse pipeline for succession,
taking into account the importance of maintaining the
Group’s culture, the challenges and opportunities facing
the Group, and the skills, experience and knowledge
needed within the Group and on the Board; and
• to maintain an ongoing review of the Group’s Equality,
Diversity and Inclusion Policy and the progress in meeting
its objectives for the Board, its Committees and the Group,
recommending changes to the Board as appropriate.
Further details on the remit and responsibilities of the
Committee can be found in its terms of reference. The terms
of reference are reviewed at least annually and approved
by the Board. The terms of reference can be found on our
website, www.stelradplc.com.
Stelrad Group plc Annual Report 202370
GOVERNANCE REPORT
Nomination Committee Report
Succession planning
This year has seen changes to the composition of the Board
and its Committees, with the retirement of George Letham
as Chief Financial Officer in November, the appointment of
Annette Borén to replace him as Chief Financial Officer also in
November, and the resignation of Terry Miller in December.
One of the Nomination Committee’s main activities during
2023 was overseeing the succession planning of the Chief
Financial Officer.
In May, it was announced that George Letham had informed
the Board of his intention to retire and to stand down from
his role as Chief Financial Officer and from the Board in
November. George made a significant contribution to the
Company over many years and he leaves Stelrad in a strong
position for future growth as a public company.
The Committee, in its role to oversee the orderly succession
of a new Chief Financial Officer, initiated an external
process with a leading search firm to appoint a successor.
Following an extensive recruitment process, the Committee
recommended that the Board appoint Annette Borén as the
new Chief Financial Officer and she joined the business and
became a member of the Board in November.
In December it was announced that Terry Miller, the Senior
Independent Director, had notified her intention to step
down from the Board and its Committees and would resign
at the end of the financial year, having originally joined the
Group as part of Stelrad’s IPO. The Committee engaged an
external search firm to source appropriate candidates for the
role, leading to the appointment of Katherine Innes Ker as
Senior Independent Director on 1 February 2024.
In line with the Company’s Equality, Diversity and Inclusion
Policy, both appointments were made on merit and against
objective criteria, taking into consideration diversity of skills
and experience, gender and social and ethnic backgrounds
as well as cognitive and personal strengths.
In the coming year, the Committee will continue to review
the long-term succession planning for the Board to ensure
that the composition of the Board and its Committees
continues to be effective, with an appropriate balance of skills,
experience, knowledge and diversity.
The Committee works closely with the Chief People Officer
toidentify and maintain robust pipelines of immediate,
short-term and longer-term leadership potential within the
senior management team, and is supported by the Chief
People Officer in ongoing review of objectives and time
frames for Board succession planning.
Board member induction
A comprehensive and tailored induction plan was established
for Annette Borén as incoming Chief Financial Officer. The
aim of the induction was to provide a detailed insight into the
Group across a breadth of areas including strategy, structure,
financing, risk management, investor relations, corporate
responsibility and compliance. During her induction period,
Annette has met with members of the Board of Directors and
with key senior managers across the Group, as well as having
made site visits to all of the manufacturing facilities within
the Group.
Board Diversity and Inclusion Policy
To deliver on our purpose, it is essential that we foster
diversity of thought and an environment where everyone
is encouraged to bring their best and true selves to work.
The Board believes that better decision making and
outcomes are achieved when people with differences of
opinion and with different backgrounds come together
with a common objective and shared ambition. As a
Board, we monitor the implementation of the Group’s
diversity and inclusion policies, including relevant metrics,
satisfying ourselves that the Group’s culture is and
remains aligned to its purpose, strategy and values.
“Diversity” describes all the characteristics, experiences
and cultural influences that make each of us unique
individuals. Our policy is to respect the diversity of all
customers, colleagues, prospective colleagues, contractors
and suppliers, and treat all fairly and equally regardless
of characteristics. “Inclusion” means that all are welcome,
and will be treated with respect and dignity in line with
our values irrespective of their individual circumstances.
This policy on diversity and inclusion applies to the
Board only but complements the Group’s wider diversity
policies, values, Code of Conduct and sustainability
framework. The Board, supported by the Board
Nomination Committee, will:
• encourage a diverse and inclusive working
environment in the boardroom, where everyone is
accepted and valued and receives fair treatment
according to their different needs and situations
without discrimination or prejudice;
• continue our journey towards greater diversity on the
Board across all dimensions, including aspiring to
reach greater representation of women and those of
an ethnic minority background over time;
• consider all aspects of diversity when reviewing the
Board’s composition, skills, experience and overall
balance, including when conducting the annual Board
effectiveness review;
• oversee the development of a diverse pipeline for
succession to the Board and ensure that all Board
appointments are subject to a formal, rigorous and
transparent procedure based on merit and objective
criteria taking into account (among other things)
factors such as diversity of gender, age, educational
and professional background, social, ethnic and
geographical background, and cognitive and
personalstrengths; and
• engage search firms which understand and agree
to comply with the Group’s values and approach to
diversity in identifying suitable Board candidates from
diverse candidate pools.
Diversity and inclusion
Diversity and inclusion continues to be a focus of the
Committee, with a commitment to promoting diversity and
inclusion on the Board. As set forth in the Board’s Diversity
and Inclusion Policy (see inset), which is reviewed annually,
the Committee recognises the importance of diversity in its
Board composition to ensure that it can draw upon a diverse
range of experience, skills and knowledge in all aspects of the
Board’s discussions and decision making.
Annual Report 2023 Stelrad Group plc 71
Diversity and inclusion continued
The Committee has a robust process for identifying and evaluating potential Board candidates and is dedicated to using search
firms that are committed to identifying suitable Board candidates from diverse candidate pools. In the recent Chief Financial
Officer search, Russell Reynolds was engaged as a partner with a strong track record in the promotion of genderdiversity.
Adetailed brief including the required skills and experience was provided to identify suitable candidates; of the candidates
interviewed directly by the Company, 27% were female, which increased to 66% for the final shortlistedcandidates.
Board diversity disclosures
Listing Rule 9.8.6(9)
As at the Company’s chosen reference date, 31 December 2023, and in line with FCA Listing Rule 9.8.6(9), the Company has
not met the target for at least 40% female membership on the Board or for one member of the Board to be from an ethnic
minority background. However, it has met the target for one of the positions of Chair, Senior Independent Director, Chief
Executive Officer or Chief Financial Officer to be held by a woman, with Annette Borén holding the position of Chief Financial
Officer and Terry Miller being in place as Senior Independent Director. The overall diversity targets were not met in the year as
the succession plans of the Group, including the recognition of diversity, will require time to materialise. Future evolution of the
Board will continue to focus on broadening the diversity of its members.
Data under LR 9.8.6(10)
In line with LR 9.8.6(10), as at the reference date of 31 December 2023, the composition of the Board and Executive
Management was as follows, with members of the Board and the Executive Management team asked to complete a diversity
disclosure form at year end.
Gender identity
Number
of Board
members
Percentage
of the Board
Number of
senior positions
on the Board
(CEO, CFO, SID
and Chair)
Number in
Executive
Management 
(1)
Percentage of
Executive
Management 
(1)
Men 5 62.5% 2 3 60%
Women
3 37.5% 2 2 40%
Not specified/prefer not to say — 0% — — 0%
Ethnic background
Number
of Board
members
Percentage
of the Board
Number of
senior positions
on the Board
(CEO, CFO, SID
and Chair)
Number in
Executive
Management 
(1)
Percentage of
Executive
Management 
(1)
White 8 100% 4 5 100%
Ethnic minority — 0% — — 0%
Not specified/prefer not to say — 0% — — 0%
(1) Stelrad has a flat structure, operating a decentralised model with local management teams in each of the key territories, supported by a small Group head
office. The Company is treating its Group roles as Executive Management for the purpose of this reporting requirement and consists of the Chief Financial
Officer, Chief People Officer, Group Operations Director, Group Finance Director and Group Strategic Marketing Director.
Board evaluation
The Committee has assisted the Chair in working with the Company Secretary to facilitate the content and process of a
comprehensive internally managed Board and Committee evaluation in the second half of 2023. The results of the evaluation,
along with an action plan for addressing any identified issues, were reported to the Board in November 2023, and the aspects
relating to Board and Committee composition and performance were reviewed by the Committee. Further details of the
format and outcome of the Board evaluation process can be found on page 63.
Progress following the 2022 Board evaluation
Additionally in the year, the Board reflected on its progress made against the outcomes from the 2022 Board evaluation.
The overall outcome of the 2022 evaluation was very positive and indicated that the Board was running effectively. While the
outcome of the evaluation showed that the Board, its Committees and the Board members operated professionally and in an
open and transparent manner, the Board developed an action plan based on the outcomes, designed to enhance further the
effectiveness of the Board. Following the discussions of the Nomination Committee, several key themes were highlighted for
focus during 2023, including in the areas of succession, ESG, stakeholder engagement and risk management. The following
table summarises progress in these areas of focus.
Stelrad Group plc Annual Report 202372
GOVERNANCE REPORT
Nomination Committee Report continued
Committee meetings and agenda
The Committee meets as often as needed and, in any case, no less than twice per year, depending on circumstances, to ensure
it is discharging its duties as a Committee in full and in accordance with its terms of reference. The Committee held four
scheduled meetings and two additional unscheduled meetings during the year ended 31 December 2023.
Agenda items for the Committee’s meetings during the year ended 31 December 2023 included:
• review of the Board’s composition and the diversity of Directors’ skills;
• review of Directors’ time commitments and time available to dedicate to the role;
• review of the Group Equality, Diversity and Inclusion Policy and the Board Diversity and Inclusion Policy;
• updates on diversity reporting across the Group;
• succession planning for Executive Directors and Non-Executive Directors of the Board;
• oversight of the Chief Financial Officer recruitment and appointment processes;
• further development of a Director induction programme and handbook; and
• the 2023 Board and Committee evaluation process, including a review of the current year outcomes and an update
oftheprior year recommendations, initiated by the Company Secretary.
The Committee’s future focus will continue to include consideration of these topics as well as the areas of focus identified
intheBoard evaluations.
Annual re-election of Directors
As required by the UK Corporate Governance Code 2018, all Directors will be subject to re-election at the next AGM. The
Committee has considered each of the current Board members in the context of re-election and is satisfied that each Director
has dedicated sufficient time to their duties and that they have shown commitment to their role. Acting on the Committee’s
advice, the Board recommends that each Director be re-elected.
Katherine Innes Ker
Chair of the Nomination Committee
8 March 2024
Area of focus Progress
Succession planning The Board continues to focus on succession planning. The process of seeking a replacement for
the Chief Financial Officer resulted in the successful recruitment of a candidate that supports the
Board’s gender diversity.
The topic is tabled at Nomination Committee meetings, with consideration given to both
diversity and independence.
ESG development The Board implemented an additional climate risk and opportunity register to complement
the Group’s risk register. Specific reference to climate change risk has also been added to
the risk register. The Board engaged a professional third party adviser on ESG to support
continued progress in this area. Progress against the ESG strategy is reported at Board
meetingstwice a year.
Stakeholder
engagement
The Board has reviewed its workforce engagement arrangements and agreed that
“alternatearrangements” under the Code remained appropriate for the Group.
The Board is comprehensively briefed on external stakeholder engagement via reports and
standard agenda items to the Board, and has remained focused on enhancing its engagement
with the wider investor community.
Risk management
framework
development
The risk management framework continues to evolve with the advice and input of the Audit
& Risk Committee Chair. During 2023, the risk register was updated to include the addition of
metrics to measure and monitor the impact of each risk.
Annual Report 2023 Stelrad Group plc 73
Overseeing how we
rewardourpeople
Highlights of 2023
• Setting incentive targets and determining incentive
outcomes for Executive Directors and senior
management, including the addition of ESG measures
within our remuneration arrangements for 2024.
• Review of total remuneration outcomes for Executive
Directors and senior management and their
alignment with strategy.
• Review of workforce remuneration across
allgeographies.
• Review of Chief Financial Officer remuneration
prior to the appointment of a new Group Chief
Financial Officer.
Focus areas for 2024
• Setting incentive targets and determining
incentiveoutcomes for Executive Directors and
seniormanagement.
• Monitoring the ongoing effectiveness of selected
ESGmeasures in remuneration.
• Oversight of wider workforce remuneration
and policies.
• Review of Directors’ Remuneration Policy in advance
ofthe triennial review at the 2025 AGM.
Committee members
Nicola Bruce (Chair)
Martin Payne
Terry Miller (resigned
31December 2023)
Katherine Innes
Ker (appointed
1February 2024)
As we commence our third full
year as a listed business, we
remain committed to aligning
executive remuneration with
long-term performance and the
experience of our key stakeholders.
Nicola Bruce
Chair of the Remuneration Committee
Annual Statement by the
Remuneration Committee Chair
Dear shareholders
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 December 2023.
This report consists of three sections:
• the Annual Statement and associated high-level summary
(remuneration at a glance);
• a summary of the Directors’ Remuneration Policy
approved by shareholders at the 2022 AGM – shareholders
will not be asked to vote on the Policy at the 2024 AGM. In
line with the applicable regulations, we have not detailed
the full Policy but included those parts that we consider
that shareholders will find most useful; and
• the Annual Report on Remuneration, which outlines the
decisions made by the Remuneration Committee (the
“Committee”) and payments made to Directors in respect
of 2023, describes the link between Company performance
and remuneration for 2023 and sets out the proposed
approach to remuneration in 2024.
We consider that the Policy has worked well in 2023 and
continues to support our strategy effectively. Therefore we will
not be asking shareholders to vote on a revised Policy at the
2024 AGM. The Directors’ Remuneration Report (excluding
the Policy) will be put to an advisory shareholder vote at
the 2024 AGM. In line with the usual three-year timetable,
shareholders will be asked to vote on a new Policy at the 2025
AGM. During 2024 we will review the Policy to ensure that
it continues to support the delivery of our strategy and the
expectations of our key stakeholders.
Board changes in 2023
As has been reported elsewhere, Annette Borén joined
the Group on 1 November 2023. Following an external
benchmarking exercise, her salary on appointment was
set at £260,000. This was set having regard to her relative
experience and the market competitive range for the role.
Her salary will next be reviewed in January 2025. Annette
receives a salary supplement of 9% of salary in lieu of pension
contributions, in line with the majority of the UK workforce.
Given Annette’s joining date of 1 November 2023, Annette
participated in the 2023 bonus arrangements in respect of
the final two months of the year, and details of the bonus
earned are included later in this report.
George Letham’s remuneration earned up to the date of
his retirement from the Board is included in the single total
figure of remuneration. As a retiree, and in line with our
Policy, the Committee determined that George Letham
is a “good leaver”. Accordingly, George was able to earn a
bonus in respect of the eleven months of the year for which
he was in service, details of which are included later in this
report. George has also retained his LTIP award granted in
2022. Theaward remains subject to its original performance
conditions and, subject to their satisfaction, will vest at the
originally envisaged date of May 2025 and then be subject to
a two-year holding period.
Stelrad Group plc Annual Report 202374
GOVERNANCE REPORT
Directors’ Remuneration Report
To the extent the performance conditions are satisfied, the
vested award will be reduced pro rata to take account of the
proportion of the vesting period for which George was in
employment. George retired from his role as an Executive
Director, and resigned from the Board, on 22 November.
George will remain as a part-time employee of the Group
asastrategic adviser to the CEO for a six-month period.
As announced on 1 December, Terry Miller stepped down
from the Board and the Committee on 31 December 2023.
On 1 February 2024, Katherine Innes Ker joined the Board and
the Committee.
Remuneration outcomes in 2023
The key highlights of the performance of the business during
the year can be found in the Strategic Report on pages 1 to 56.
Fixed remuneration
As we reported last year, the Executive Directors’ salaries were
increased by 4% with effect from 1 January 2023 to £515,000
(in the case of Trevor Harvey) and £330,000 (in the case of
George Letham). These increases were below the 10% increase
awarded to the majority of the UK workforce and below
the 6% awarded to other members of senior management.
However, in recognition of the challenging macroeconomic
environment and the cost of living pressures for our workforce,
Trevor Harvey and George Letham requested that their
salary increase not be implemented until January 2024. As
a consequence, for financial year 2023, Trevor Harvey’s and
George Letham’s salaries remained at £495,101 and £316,866.
No changes were made to the Executive Directors’ benefits
and pensions in 2023, with salary supplements in lieu of
pension contributions remaining at the 9% of salary level,
inline with the wider UK workforce.
Annual bonus
The Annual Bonus Plan (“ABP”) structure for 2023 reflected
the Policy approved at the 2022 AGM. Each Executive Director
was eligible to earn a bonus of up to 125% of salary based on
performance against:
• Group adjusted operating profit targets (with a 70%
weighting); and
• Group adjusted cash flow targets (with a 30% weighting).
Full details of the targets and performance against them are
set out on page 83. As set out on page 83, the final outturn
for Group adjusted operating profit, which accounted for
70% of total bonus, delivered performance between target
and maximum. The cash flow target, which accounted for
30% of total bonus, was not achieved, resulting in a bonus
entitlement of 42.7% of the maximum award (equivalent to
53.4% of salary). The bonus awards for George Letham and
Annette Borén are pro rata to their periods of entitlement,
which are eleven months and two months respectively. In line
with the Policy, 75% of the bonuses earned will be paid in cash
with the remaining 25% deferred into Stelrad shares for two
years under the Deferred Share Bonus Plan.
LTIP
A Long Term Incentive Plan (“LTIP”) is in place for Executive
Directors and other members of senior management.
Thefirst awards under the LTIP were granted in May 2022
and vest by reference to performance over the three financial
years 2022, 2023 and 2024. Therefore, no long-term incentive
awards were capable of vesting in respect of performance
inthe year ended 31 December 2023.
As referenced in last year’s report, LTIP awards were
not granted during 2023 in view of the challenging
economic climate.
Wider workforce remuneration in 2023
The Group supports the collective bargaining process in the
UK, Turkey, the Netherlands and Italy with local employee
representation where appropriate. We adhere to the
outcome of national collective agreements regarding pay,
and implement these according to the earliest appropriate
timescales. We also keep under regular review the non-pay-
related benefits offered to our employees to ensure these
remain competitive and of value to our workforce. At Stelrad,
we consider that our workforce is our most important asset
and for 2024, as part of the ESG component of our Annual
Bonus Plan for Executive Directors, we will include a metric
relating to labour turnover.
Implementation of the Policy in 2024
Salary
As described last year, we applied an increase of 4% to the
Executive Directors’ salaries in 2023, a level of increase which
was below the 10% increase awarded to the majority of the
UK workforce and below the 6% awarded to other members
of senior management. However, and as we reported at
the time, in recognition of the challenging environment
and cost of living pressures for the workforce, Trevor Harvey
and George Letham requested that their increase was not
implemented until January 2024. The Committee would
like to thank Trevor and George for the action they took to
defer the implementation of their 2023 salary increase in
recognition of the challenging inflationary environment
thatwas being experienced by our workforce.
As a consequence of the deferred 2023 increase of 4%, Trevor
Harvey’s base salary for review at 1 January 2024 was £515,000.
As a result of the 2024 annual salary review, the Committee
determined to apply a further 4% increase to the CEO’s
salary in line with the 4% awarded to the majority of the UK
workforce. From 1 January 2024, Trevor Harvey’s base salary
will therefore rise to £535,600, which remains appropriate
tohis role andexperience.
Annette Borén’s salary was set at £260,000 on appointment
on 1 November 2023 and will remain at this level
throughout 2024.
Annual Bonus Plan
In 2024, the Executive Directors and other members of
senior management will again participate in an Annual
Bonus Plan (“ABP”) arrangement. For Executive Directors,
the ABP provides that they can earn up to 125% of base salary
for delivering stretching performance targets, with 75% of
any bonus earned to be paid in cash and 25% to be paid in
deferred shares to ensure longer-term alignment with the
interests ofshareholders.
In continued support of our strategy, recognising the
importance of stability and continuity, and consistent with
the financial measures of the 2023 ABP, the Committee
has again decided to apply two financial measures: Group
adjusted operating profit and Group adjusted cash flow from
operations. Group adjusted operating profit will account for
70% of total potential award and Group adjusted cash flow
from operations will account for 20% of total potential award.
In addition, for 2024, following on from the commitments
made in our 2023 Annual Report and Accounts and the
ongoing development of our sustainability strategy, Fit for the
Future, we are pleased to introduce an ESG component to
our variable remuneration.
Annual Report 2023 Stelrad Group plc 75
Implementation of the Policy in 2024 continued
Annual Bonus Plan continued
The ESG component will have a 10% weighting and
will be based on the achievement of stretching targets
that underpin our two strategic pillars, driving better
environmental performance and enabling an exceptional
workforce. These targets will relate to two measures: relating
to the recycled content of packaging material used and our
Group voluntary labour turnover rate.
Both the ESG measure and the cash flow measure will be
underpinned by the requirement to achieve the target
adjusted Group operating profit measure. In line with our
Policy, the Committee retains discretion to adjust formulaic
ABP outcomes based on a holistic assessment of Company
performance including the experience of all stakeholders
inassessing the overall bonus outturn.
It is the Committee’s intention to retrospectively disclose
the targets for the 2024 ABP once pay-outs have been
determined, as with the 2023 ABP performance targets
on page 83, as the targets are currently deemed to be
commercially sensitive.
Long Term Incentive Plan
Our Policy includes the ability to grant LTIP awards annually
to our Executive Directors of up to 150% of base salary. In
recognition of the continued challenging trading conditions,
LTIP awards will be granted in 2024 for Executive Directors
up to a maximum of 50% of base salary. We also intend to
grant LTIP awards to key members of senior management
up to a maximum of 50% of salary. The Committee’s view is
that these LTIP awards will support the key elements of our
strategy, aligning the interests of our senior leadership with
our shareholders and other stakeholders.
To ensure alignment with our business strategy, and in
line with good practice, the Committee has selected one
financial performance measure and one market performance
measure for the Executive Director LTIP award. The financial
measure will be adjusted EPS with a weighting of 80% of
the total award; the market measure will be the Group’s
total shareholder return (“TSR”) as compared to the selected
benchmark, the FTSE Small Cap index, with a weighting of
20% of the total award. Awards will be granted in the first
half of 2024. Vesting will be conditional on the achievement
of three-year EPS and TSR performance targets, which are
outlined in detail in the table on page 87. Executive Directors’
shares from vested awards will be required to be held for a
further two years.
Malus and clawback provisions apply for a period of three
years following vesting.
As the Group’s ESG strategy evolves, the Committee will
continue to consider the development of appropriate ESG
measures for inclusion in long-term incentives.
Conclusion
I trust the information presented in this report enables our
shareholders to understand both how we have operated our
Directors’ Remuneration Policy over the year and our rationale
for decision making. We regularly review our remuneration
policy and practice to ensure that it remains aligned with
our business strategy and the evolving regulatory landscape.
Webelieve that the Policy operated as intended and we
consider that the remuneration received by the Executive
Directors during the year was appropriate, taking into
account Group and personal performance, as well as the
experience of all stakeholders. The Remuneration Committee
did not apply any discretion to reward outcomes in respect
ofthe year ended 31 December 2023.
We remain committed to maintaining a clear, open
and transparent dialogue with our shareholders on
executiveremuneration.
On behalf of the Board, I would like to thank shareholders for
their continued support and we hope that you will support
the resolution requesting approval of the Annual Report
on Remuneration at this year’s Annual General Meeting
on22May 2024.
Nicola Bruce
Chair of the Remuneration Committee
8 March 2024
Stelrad Group plc Annual Report 202376
GOVERNANCE REPORT
Directors’ Remuneration Report continued
This report has been prepared in accordance with the applicable remuneration reporting regulations, the FCA Listing Rules
and the UK Corporate Governance Code.
Remuneration at a glance
Implementation of the Remuneration Policy in 2024
For 2024, the Executive Directors will be remunerated in line with the approved Policy, as summarised in the table below.
Element of pay Implementation in 2023 Proposed implementation for 2024
Fixed remuneration
Base salary As was described in the 2022 Directors’
Remuneration Report, the 4% base salary
increase for 2023 approved by the Committee
would be implemented with effect from
1January 2024 in addition to any 2024 annual
increase approved at that time. Thus for
financial year 2023, the CEO and CFO salaries
remained at £495,101 and £316,866, pending
the deferred increase. Consequently, the CEO
base salary for adjustment on 1 January 2024
was £515,000; the former CFO retired from the
Board in November 2023.
On 1 November, Annette Borén joined the
Group, on an initial salary of £260,000.
Further to implementation of the Executive
Directors’ deferred 2023 salary increase, and
application of a further 4% increase from
1January 2024 associated with the 2024 salary
increase, the CEO salary will be £535,600
effective from 1 January 2024.
The salary of the new CFO will remain
at £260,000 in 2024 as agreed upon her
appointment on 1 November 2023.
Pension The Executive Directors receive a salary supplement in lieu of pension contribution of 9%
of salary.
Benefits Each Executive Director receives the benefit of a life assurance scheme, private health cover
anda car allowance. Trevor Harvey and George Letham also benefit from the reimbursement
offuel expenses.
Variable pay
ABP Bonus opportunities of up to 125% were
awarded. Based on the stretching targets, a
bonus of 53.4% of salary was earned by each
Executive Director.
The bonus awards for George Letham and
Annette Borén are pro rata to their periods
ofentitlement, which are eleven months and
twomonthsrespectively.
75% of the annual bonus will be paid in
cash, with the remaining 25% delivered
asdeferred shares.
The ABP will award up to a maximum of 125%
of base salary, based on the achievement
of two financial measures: Group adjusted
operating profit (70%); and adjusted cash flow
from operations (20%). ESG measures that are
important to Stelrad’s sustainability strategy,
Fit for the Future, will determine 10% of the
award. Both the cash flow measure and ESG
component will be underpinned by the target
Group adjusted operating profit measure.
75% of the annual bonus will be paid in
cash, with the remaining 25% delivered as
deferred shares.
LTIP No LTIP awards were capable of vesting by
reference to performance in 2023.
No LTIP awards were granted in 2023.
The Policy provides for an annual LTIP award
up to a maximum of 150% of base salary.
LTIP awards will be granted in 2024 with
Executive Director awards granted at the level
of up to 50% of salary vesting by reference to
adjusted EPS targets (80% of the awards) and
relative TSR (20% of the awards) assessed over
a three-year period and subject to a post-
vesting two-year holding period.
Annual Report 2023 Stelrad Group plc 77
Remuneration Policy
The Group’s Directors’ Remuneration Policy (the “Policy”) was approved by shareholders at the AGM on 16 May2022.
As shareholders will not be asked to vote on the Policy at the 2024 AGM and in line with the applicable regulations,
we have not included the full Policy but have summarised those parts that we consider that shareholders will
find most useful. The full Policy is set out on pages 63 to 68 of the 2021 Annual Report which is available at
https://stelradplc.com/investors-2/results-reports-and-presentations/.
UK Corporate Governance Code principles
The table below reflects how the Remuneration Policy fulfils the factors set out in provision 40 of the 2018 UK Corporate
Governance Code.
Criteria Approach
Clarity – Remuneration arrangements should be transparent
and promote effective engagement with shareholders and
the workforce.
The Committee operates a consistent remuneration
approach that is well understood internally and externally.
TheCommittee regularly engages with major shareholders
onexecutive remuneration and undertook a detailed
consultation ahead of the admission to the Main Market.
Simplicity – Remuneration structures should avoid
complexity and their rationale and operation should be easy
to understand.
Our remuneration arrangements for Executive Directors are
based on a market-standard remuneration structure consisting
of fixed pay, an annual bonus and a single long-term incentive.
This design is simple in nature and well understood by
participants as well as other stakeholders.
Risk – Remuneration arrangements should ensure
reputational and other risks from excessive rewards, and
behavioural risks that can arise from target-based incentive
plans, are identified and mitigated.
Targets are reviewed annually to ensure they are adequately
stretching yet achievable without encouraging excessive risk
taking. Using recovery provisions or discretion, the Committee
retains the ability to override formulaic incentive outcomes
in the event that these produce a result inconsistent with the
Group’s remuneration principles.
Alignment to culture – Incentive schemes should drive
behaviours consistent with Company purpose, values
and strategy.
The variable incentive schemes and performance measures
aredesigned to be consistent with the Group’s purpose,
valuesand strategy. We believe that aligning remuneration
practices across the business is a key element of supporting
our culture, fulfilling our values and being a strong driver of
business performance.
Predictability – The range of possible values of rewards
to individual Directors and any other limits or discretions
should be identified and explained at the time of approving
the Policy.
The Committee maintains clear caps on incentive
opportunities and will use its available discretion if necessary.
The potential value and composition of the Executive Directors’
remuneration packages at below threshold, target and
maximum scenarios are provided in the Remuneration Policy.
Proportionality – The link between individual awards,
thedelivery of strategy and the long-term performance
oftheGroup should be clear. Outcomes should not reward
poor performance.
Executives are incentivised to achieve stretching targets over
annual and three-year performance periods. The Committee
assesses performance holistically at the end of each period,
taking into account underlying business performance and the
internal and external context to ensure that pay outcomes are
appropriate and reflective of overall performance.
Consistent with best practice, the Committee may apply discretion with respect to outcomes that affect the actual level of
reward payable to individuals, both upwards and downwards. Such discretion, if exercised, would be disclosed in the report
onimplementation of the Policy (i.e. the Annual Report on Remuneration) for the year in question.
Wider workforce considerations and engagement
The Committee has responsibility for reviewing remuneration and related policies applicable to the wider workforce. To support
this, the Committee is periodically briefed on the structure and quantum of the all-employee remuneration as well as being
informed about the context, challenges and opportunities related to wider workforce remuneration topics. This enables the
Committee to take the wider workforce into account when setting the policy for executive remuneration. The Committee
receives insights from the broader employee population via regular briefings from the Company, including feedback from the
employee survey. When considering salary increases for the Executive Directors, the Committee considers the general level of
salary increase across the Group and in the external market.
Stelrad Group plc Annual Report 202378
GOVERNANCE REPORT
Directors’ Remuneration Report continued
Remuneration Policy summary
Element of
remuneration
Purpose and link to
strategy Operation Maximum opportunity Performance measures
Base salary To provide
competitive
fixedremuneration.
To attract, retain and
motivate Executive
Directors of the
calibre required
to deliver the
Group’s strategy.
An Executive Director’s salary
takes into account the individual’s
professional experience,
individual performance, level of
responsibility and the scope and
nature of their role and is set with
reference to market. Base salaries
will typically be reviewed on an
annual basis.
Any Executive Director
salary increases will not
normally exceed those
of the majority of the
Group’s employees
unless exceptional
correctional increases are
appropriate (for example
if an Executive Director
was initially appointed
below the relevant
benchmark level).
Not applicable.
Benefits
and pension
To provide market
competitive levels of
employment benefits.
The Executive Directors receive
a salary supplement in lieu of
pension contribution of 9%
of salary. This contribution
percentage is in line with the
average of the Group’s UK
workforce. Any new Executive
Directors will have their pension
contributions set in line with the
majority of the UK workforce.
Each Executive Director is
entitled to the benefit of a life
assurance scheme, private health
cover and a car allowance. Trevor
Harvey and George Letham are
entitled to the reimbursement of
fuel expenses.
The benefits package is
set at a level which the
Committee considers
provides an appropriate
level of benefits for the
role and is appropriate
in the context of the
benefits offered to the
wider workforce or to
comparable roles in
companies of a similar size
andcomplexity.
Not applicable.
ABP To reward the year on
year achievement of
demanding annual
performance metrics.
Performance measures,
weightings and targets are
reviewed annually by the
Committee and may be changed
from time to time.
Threshold, targets and
stretch goals are set for each
performance measure.
No more than 75% of the annual
bonus will be paid out as cash
after the end of the financial year.
The remainder will be issued as
awards under the Deferred Share
Bonus Plan (“DSBP”).
DSBP awards will be in the form
of conditional awards or nil-cost
options with awards normally
vesting after two years.
Under the DSBP, an additional
payment, in cash and/or shares,
may be made equal to the
value of dividends which would
have accrued on vested shares
between the grant date and date
of vesting.
Malus and clawback
provisions apply.
Up to 125% of salary.
Percentage of maximum
bonus earned for levels of
performance:
• Threshold: up to 24%.
• On target: up to 50%.
• Maximum: up to 100%.
A minimum of 70%
of weighting will
be associated with
financial targets.
The Board will
determine the
actual bonus
outcome basedon
achievementagainst
predetermined targets.
Actual targets,
performance achieved
and awards made
will be published
at the end of the
performance period.
Annual Report 2023 Stelrad Group plc 79
Element of
remuneration
Purpose and link to
strategy Operation Maximum opportunity Performance measures
LTIP To provide a
direct link to the
achievement
of sustainable
performance over
the longer term.
Awards will be in the form of
conditional awards or nil-cost
options with vesting subject to
the achievement of performance
conditions determined by the
Committee at the time of grant.
The measurement period for the
performance conditions for LTIP
awards will normally be a period of
three financial years.
Additionally, a two-year post-vesting
holding period will normally apply
at the end of each relevant vesting
period for Executive Directors.
An additional payment, normally in
shares, may be made equal to the
value of dividends which would have
accrued on vested shares between
the grant date and date of vesting.
Malus and clawback provisions apply.
LTIP award levels will be
no greater than 150% of
base salary.
The Committee
will determine
the appropriate
performance
conditions prior to
grant each year,
to align with the
Company’s longer-
term strategy.
Performance
conditions may
include financial,
market-based and/
or non-financial
measures. Financial
and market-based
measures will
account for at
least 70% of the
total award.
Share
ownership
guidelines
To provide long-
term alignment
between Executive
Directors and
shareholders.
Executive Directors are expected to
build up and then subsequently hold
a shareholding equivalent to 200% of
base salary.
Following cessation of employment,
Executive Directors will also be required
to retain for two years the lower of: (i) the
200% shareholding requirement; and
(ii) the shares accumulated towards the
shareholding requirement that have
been granted under the LTIP from 2022
onwards, at the date of termination.
Progress against the
shareholding requirement
will be reviewed by the
Committee annually.
Not applicable.
Non-Executive
Director fees
To attract and
retain Non-
Executive Directors
of a high calibre
with relevant
commercial and
other experience.
Non-Executive Directors receive
a base fee and additional fees for
acting as Senior Independent
Director or Chair of the Board
Committees and for membership
of Board Committees (or to reflect
any additional time commitments
–subject to approval from the Chair).
The Chair receives a fixed annual
fee with additional fees payable to
reflect additional time commitment
in certain circumstances, such as in
periods of exceptionally high activity
–subject to approval.
Fees are typically reviewed annually,
taking into account the time
commitment requirements and
responsibility of the individual roles,
and after reviewing practice in other
comparable companies.
The fee paid to the Chair is determined
by the Committee, while the fees for
other Non-Executive Directors are
determined by the Board as a whole.
For the Non-Executive
Directors, there is no
prescribed maximum
annual increase.
The maximum cap for
the totalaggregate
remuneration paid to the
Chair of the Company
and theNon-Executive
Directors is set within the
Company’s Articles of
Association.
Actual fee levels are
disclosed in the Annual
Report on Remuneration
for the relevant
financial year.
The Company will
reimburse any reasonable
expenses incurred.
Not applicable.
Remuneration Policy continued
Remuneration Policy summary continued
Stelrad Group plc Annual Report 202380
GOVERNANCE REPORT
Directors’ Remuneration Report continued
Malus and clawback provisions
Consistent with best practice, malus and clawback will be
used at the Committee’s discretion in relation to ABP, DSBP
and LTIP awards. Malus permits the Company to reduce the
amount of any unvested award, including awards in holding
periods. Clawback permits the Company to reduce the amount
of any vested award or any future salary or bonus and also
require the employee to pay back amounts.
Malus and clawback may be applied at any time before an
award vests (or would have vested but for the operation of any
holding period) or for three years after vesting in the following
circumstances: material misstatement of the results of the
Group, errors or inaccuracies or misleading information leading
to incorrect grant or vesting of the award, gross misconduct,
material failure of risk management by the Group, corporate
failure (e.g. administration or liquidation) or any other circumstance
which in the opinion of the Committee could have a significantly
adverse impact on the Group’s reputation.
Service agreements and letters of appointment
Each of the Executive Directors has entered into a service
agreement with the Company and each of the Non-Executive
Directors has entered into a letter of appointment with
the Company.
The Committee’s policy for setting notice periods is that a
twelve-month period will apply for the CEO and a six-month
period will apply for the CFO.
Name Position
Date of service
agreement
Notice
period by
Company
(months)
Notice
period by
Director
(months)
Trevor Harvey CEO 22 October 2021 12 12
Annette Borén CFO 1 November 2023 6 6
The Non-Executive Directors of the Company (including the Chair)
are appointed by letters of appointment. Their terms are
subject to their re-election by the Company’s shareholders
at any AGM at which the Non-Executive Directors stand for
re-election (in accordance with the Company’s Articles of
Association). The details of each Non-Executive Director’s
current terms are set out below:
Name Date of appointment
Bob Ellis 8 October 2021
Edmund Lazarus 8 October 2021
Nicholas Armstrong 8 October 2021
Nicola Bruce 22 October 2021
Martin Payne 22 October 2021
Katherine Innes Ker 1 February 2024
Annual Report on Remuneration
The following section sets out our Annual Report on
Remuneration and outlines how the Policy was implemented
in 2023. The Annual Report on Remuneration will be subject
to an advisory shareholder vote at the AGM to be held on
22 May 2024.
Some sections of this report have been reported on by the
auditors and are thus clearly indicated as audited. All other
information in this report is unaudited.
Membership and meetings of the
Remuneration Committee
Membership during 2023 comprised the Committee Chair
(Nicola Bruce), who is an independent Non-Executive Director,
and two further independent Non-Executive Directors (Terry
Miller and Martin Payne) with support from the Group’s Company
Secretary. Terry Miller stepped down from the Board and the
Committee on 31 December 2023. The Committee receives
assistance from the Group’s Chief People Officer, who regularly
attends meetings by invitation. The CEO also attends by invitation.
The Committee will keep its composition under review to ensure
it remains appropriate. The Board is satisfied that the Committee
has the competence and experience necessary to discharge its
duties effectively. Details of the Directors’ experience and skill sets
can be found in the Director biographies on pages 58 to 60.
The Major Shareholder remains entitled to nominate an observer
to the Remuneration Committee, subject to the terms of
the shareholder agreement outlined in the Prospectus at
the time of admission. The Committee has been pleased to
welcome Nicholas Armstrong to all meetings in 2023.
The Committee will meet not less than three times a year.
During the year ended 31 December 2023, the Committee
held five scheduled meetings. The Directors consider that the
Company complies with the requirements of the UK Corporate
Governance Code in respect of remuneration committees.
Key responsibilities
The key responsibilities of the Remuneration Committee are:
• to determine the Remuneration Policy (the “Policy”) and to set
the total remuneration packages for all Executive Directors,
the Chair of the Company and senior management;
• to approve the design of, and determine targets for,
any performance-related pay schemes operated by the
Company and approve the total annual payments made
under such schemes;
• to align the Policy with the UK Corporate Governance
Code’s requirement for clarity, simplicity, risk mitigation,
predictability and proportionality;
• to ensure that the Policy drives behaviours that are
consistent with Company purpose, values and strategy;
• to review workforce remuneration and related policies and
the alignment of incentives and rewards with culture; and
• to review any major changes in employee benefit structure
and to administer all aspects of any share scheme.
Further details on the remit and responsibilities of the
Committee can be found in its terms of reference. The terms
of reference, which are reviewed annually and approved by
the Board, can be found on our website, www.stelradplc.com.
Advisers (unaudited)
The Committee appointed Deloitte LLP (“Deloitte”) with
effect from October 2022 to provide independent advice
on executive remuneration matters. Deloitte is a signatory
to the Code of Conduct for Remuneration Consultants in the
UK. The fees paid to Deloitte in relation to advice provided to
the Committee for 2023 were £14,775 (2022: £6,850). Prior to
the appointment of Deloitte, the Committee was advised by
Mercer, whose fees for 2022 until October were £43,300.
The Committee will evaluate the support provided by Deloitte
annually and is content that it does not have any connections
with the Group that may impair its independence. During
the year, Deloitte also provided advice in relation to corporate
tax matters.
Annual Report 2023 Stelrad Group plc 81
Information on remuneration for the year ended 31 December 2023
Single total figure of remuneration for the year ended 31 December 2023 (audited)
The following table sets out the single figure of total remuneration received by the Directors who served during the year ended
31 December 2023:
£’000 Year
Basic salary/
fees
All taxable
benefits 
(1)
Pension-
related
benefits 
(2)
Annual
bonus LTIP
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
Executive Directors
Trevor Harvey 2023 495 28 45 264 — 832 568 264
Annette Borén
(3)
2023 27 2 2 15 — 46 31 15
George Letham
(4)
2023 284 22 26 155 — 487 332 155
Non-Executive Chair
Bob Ellis 2023 120 — — — — 120 120 —
Non-Executive Directors
Terry Miller 2023 83 — — — — 83 83 —
Nicola Bruce 2023 74 — — — — 74 74 —
Martin Payne 2023 74 — — — — 74 74 —
Edmund Lazarus
(5)
2023 — — — — — — — —
Nicholas Armstrong
(5)
2023 — — — — — — — —
Total 2023 1,157 52 73 434 — 1,716 1,282 434
The following table sets out the single figure of total remuneration received by the Directors who served during the year ended
31 December 2022:
£’000 Year
Basic salary/
fees
All taxable
benefits 
(1)
Pension-
related
benefits 
(2)
Annual
bonus LTIP
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
Executive Directors
Trevor Harvey 2022 495 29 45 — — 569 569 —
George Letham 2022 317 24 28 — — 369 369 —
Non-Executive Chair
Bob Ellis 2022 120 — — — — 120 120 —
Non-Executive Directors
Terry Miller 2022 83 — — — — 83 83 —
Nicola Bruce 2022 74 — — — — 74 74 —
Martin Payne 2022 74 — — — — 74 74 —
Edmund Lazarus
(5)
2022 — — — — — — — —
Nicholas Armstrong
(5)
2022 — — — — — — — —
Total 2022 1,163 53 73 — — 1,289 1,289 —
(1) Benefits provided include: life assurance cover, private health cover, a car allowance and, for Trevor Harvey and George Letham, the reimbursement of
fuel expenses.
(2) Salary supplement in lieu of pension contribution of 9%.
(3) Annette Borén joined the Board on 22 November 2023. Her remuneration in the table above is from that date. She was eligible to earn a bonus in respect
of 2023 from 1 November 2023 (the date she joined the Group). The portion of that bonus attributable to her service from 22 November is included in the
table above.
(4) George Letham retired from the Board on 22 November 2023. His remuneration in the table above is to that date, including the bonus he was eligible to
earn in respect of the eleven months of the year to November 2023.
(5) Edmund Lazarus and Nicholas Armstrong are representatives of the Major Shareholder and receive no fees for their roles as Non-Executive Directors.
Stelrad Group plc Annual Report 202382
GOVERNANCE REPORT
Directors’ Remuneration Report continued
Incentive outcomes for 2023 (audited)
The maximum bonus opportunity for 2023 was 125% of salary for each Executive Director, with the amount earned based on
the achievement of two financial measures. Details of the performance targets set and the performance against them are set
out below.
Performance targets
Metric Weighting Threshold * On target Maximum Actual
% of
maximum
bonus
opportunity
50% of
maximum 100%
Group adjusted operating profit 70.0% n/a £28.659m £31.525m £29.288m 42.7%
Adjusted cash flow from operations 30.0% n/a £32.555m £35.420m £31.757m 0.0%
42.7%
* No bonus is payable to Executive Directors below on target performance and as such no threshold performance targets were established.
In line with the Policy, the Committee reviewed the formulaic outturn in the context of underlying business performance and
the broader stakeholder experience and concluded that the outturn of a bonus entitlement of 53.4% of salary, equivalent to
42.7% of maximum bonus opportunity, was reflective of that performance and experience. 75% of the bonuses earned will be
paid in cash and 25% will be deferred into Stelrad shares for two years under the Deferred Share Bonus Plan. DSBP awards are
not subject to any further performance conditions.
Long Term Incentive Plan vesting (audited)
The first and only long-term incentives were issued in May 2022 and have a three-year vesting period. As such, no long-term
incentives have vested in the year or in respect of performance during the year (2022: none).
Payments for loss of office (audited)
No payments for loss of office were made during the year under review (2022: none). The treatment of George Letham’s
incentive arrangements in connection with his retirement from the Board is described in the statement from the
Remuneration Committee Chair.
Payments to past Directors (audited)
A payment of £20,105 was made to George Letham for the period from 23 November 2023 to 31 December 2023, after his
resignation from the Board on 22 November 2023 (2022: none), according to the terms of his revised employment contract
associated with his part-time role as strategic adviser to the CEO for a six-month period.
LTIP awarded during the financial year (audited)
No LTIP awards were granted during the year under review (2022: none).
Annual Report 2023 Stelrad Group plc 83
Information on remuneration for the year ended
31December2023 continued
Statement of Directors’ interests (audited)
The interests of the Directors who served in the year and who held an interest in the ordinary shares of the Company are
as follows:
Interests
Ordinary
shares held at
31 December
2022
Ordinary
shares held at
31 December
2023
Subject to
deferral/
holding period
Unvested and
subject to
performance
conditions
Total of all scheme
interests and
shareholdings
as at
31 December
2023
Executive Directors
Trevor Harvey 11,455,129 11,455,129 — 348,663 11,803,792
Annette Borén — — — — —
George Letham 5,727, 564 5,727,564 — 223,145 5,950,709
Non-Executive Directors
Bob Ellis 2,863,782 2,863,782 — 2,863,782
Terry Miller 4,325 4,325 — 4,325
Nicola Bruce 4,651 4,651 — 4,651
Martin Payne 9,302 9,302 — 9,302
Edmund Lazarus — — — —
Nicholas Armstrong — — — —
Executive Directors’ share ownership guidelines (audited)
In accordance with the Policy, the shareholding requirements currently in place are 200% of base salary for the Executive
Directors. Non-Executive Directors are not subject to a shareholding requirement. The table below shows the actual Executive
Director share ownership compared with the share ownership guidelines:
Director
Beneficially
owned
shares as at
31 December
2023
Shareholding
requirement
(%of salary) 
(1)
Current
shareholding
(% of salary) 
(1)
Shareholding
requirement
met?
Trevor Harvey 11,455,129 200% 3,019% Yes
Annette Borén — 200% 0% No
George Letham 5,727, 564 200% 2,359% Yes
(1) The share price of £1.305 as at 31 December 2023 has been used for the purpose of calculating the current shareholding as a percentage of salary.
No changes in the above interests have occurred between 31 December 2023 and the date of this report.
Stelrad Group plc Annual Report 202384
GOVERNANCE REPORT
Directors’ Remuneration Report continued
Performance graph (unaudited)
The graph below shows the total shareholder return (“TSR”) performance of an investment of £100 in Stelrad Group plc’s shares
from its listing on the Main Market on 10 November 2021 (using the offer price of £2.15 per share) to the end of the period,
compared with £100 invested in the FTSE Small Cap index over the same period. The FTSE Small Cap index was chosen as a
comparator because its constituents have a comparable market capitalisation to that of the Group.
The table below illustrates the CEO’s single figure of total remuneration over the same period.
Financial year CEO single figure Annual bonus pay-out (% of maximum) LTIP vesting (% of maximum)
2021
(1)
£128k 100% n/a 
(2)
2022 £569k 0% n/a 
(2)
2023 £832k 42.7% n/a 
(2)
(1) The 2021 figures are based on the single remuneration figure for the period from admission on 10 November 2021 to 31 December 2021.
(2) The first LTIP awards were granted in May 2022 and therefore no awards were due to vest.
CEO pay ratio (audited)
The table below sets out the ratio between the CEO’s salary and total remuneration and that of the 25th percentile, median and
75th percentile of our UK employees, for whom total remuneration has been calculated on the same basis.
CEO pay ratio 2023 2022 2021
Method Option A Option A Option A
75th percentile 16:1 11:1 22:1
Median 24:1 16:1 28:1
25th percentile 27:1 18:1 34:1
The salary and total remuneration for the individuals identified at the 25th percentile, median and 75th percentile for the year
ended 31 December 2023 are set out below:
£’000 CEO 25th percentile Median 75th percentile
Basic salary 495 29.3 32.9 44.9
Total remuneration 832 30.8 35.0 50.7
The lower quartile, median and upper quartile employees were determined using calculation method A which involved
calculating the actual full-time equivalent remuneration for all UK employees by reference to their remuneration as at
31December in the relevant year. From this analysis, three employees were then identified as representing the 25th, 50th
and75th percentiles of the UK employee population. The Group chose this method as it is considered to be the most accurate
way of identifying the relevant employees required by the applicable regulations. No other adjustments were necessary, and no
elements of employee remuneration have been excluded from the pay ratio calculation.
The CEO’s overall remuneration opportunity includes a significant performance-related element, so that the amount the CEO
earns and, therefore, ratios will depend upon the performance-related remuneration outturns and may fluctuate year on year.
The increase from 2022 to 2023 in the ratio between all employee reference points and CEO pay reflects that the CEO received
a bonus in respect of 2023 having waived his 2022 bonus entitlement. The Company believes that the median pay ratio is
consistent with the pay, reward and progression policies for the Group’s UK employees more generally.
£110
£100
£90
£80
£70
£60
£50
£40
£30
£20
£10
£0
Stelrad
FTSE Small Cap
31/12/2021 31/03/2022 30/06/2022 30/09/2022 31/12/2022 31/03/2023 30/06/2023 30/09/2023 31/12/2023
10/11/2021
Annual Report 2023 Stelrad Group plc 85
Information on remuneration for the year ended
31December2023 continued
Relative importance of spend on pay (unaudited)
The table below shows the Group’s expenditure on employee pay compared to distributions to shareholders for the years
ended 31 December 2023 and 31 December 2022. All figures provided are taken from the consolidated financial statements.
2023
£’000
2022
£’000
Percentage
change
Overall spend on pay including Executive Directors 53,423 42,925 24.5%
Distribution to shareholders 9,729 4,941 96.9%
Percentage change in Directors’ remuneration (unaudited)
The table below shows the percentage change in the salary or fees, benefits and annual bonus for each of the Directors
compared to that for an average employee for the periods 2022–2023 and 2021–2022.
For the average employee change, the regulations require us to show the change for employees of Stelrad Group plc.
StelradGroup plc has no employees and, accordingly, in the interests of transparency, we have included the change based on
the mean employee pay for all UK employees in the Group, being a comparator group that is consistent with the comparator
group used for the CEO pay ratio disclosure.
George Letham retired from the Board during the year; to enable a meaningful comparison, the change in his remuneration
between 2022 and 2023 in the table below is based on his 2023 remuneration as an Executive Director but annualised.
AnnetteBorén only commenced her role as CFO in the year and therefore has been excluded from the table. Neither
EdmundLazarus nor Nicholas Armstrong receives a fee for their role as a Non-Executive Director and each has therefore
beenexcluded from the table.
Average % change 2022 to 2023 Average % change 2021 to 2022
Salary/fees
Taxable
benefits 
(1)
Annual
bonus 
(2)
Salary/fees
Taxable
benefits
(
 
1)
Annual
bonus 
(2)
Executive Directors
Trevor Harvey 0% (3%) n/a 
(3)
4% 8% n/a 
(3)
George Letham 0% 2% n/a 
(3)
4% 5% n/a 
(3)
Non-Executive Directors
Bob Ellis 0% n/a n/a 0% n/a n/a
Terry Miller 0% n/a n/a 0% n/a n/a
Nicola Bruce 0% n/a n/a 0% n/a n/a
Martin Payne 0% n/a n/a 0% n/a n/a
Average employee (1%) (5%) 135% 15% 11% (55%)
(1) Taxable benefits include car allowance, health cover, life assurance and the reimbursement of fuel expenses but exclude the salary supplement in lieu of
pension contributions.
(2) Annual bonus is based on the accrued year-end amount.
(3) Because no bonus was earned for 2022, the percentage change between 2021 and 2022 and between 2022 and 2023 is not considered a
meaningfuldisclosure.
In the UK, the average employee benefited from two pay awards in 2022, being that on 1 January 2022 and the early 2023 award
made on 1 November 2022. Due to the early 2023 awards received no further pay awards were made in 2023.
External appointments
The Executive Directors are permitted to hold external appointments and are entitled to retain the fees earned from
such appointments. All Directors are required to seek approval from the Board prior to accepting external appointments.
Currently,Trevor Harvey holds one external appointment and Annette Borén has two external appointments.
Shareholder approval of our Directors’ Remuneration Policy and Directors’ Remuneration Report
The Directors’ Remuneration Policy and the 2022 Directors’ Remuneration Report were approved at the 16 May 2022 and
22May 2023 AGMs respectively. Details of the voting outturns are set out below:
Resolution Votes for % of votes for Votes against
% of votes
against
Votes
withheld
Approve the Directors’ Remuneration Policy 115,852,581 99.1 1,056,964 0.9 0
Approve the 2022 Directors’ Remuneration Report 118,093,205 100.0 2,900 0.0 0
Stelrad Group plc Annual Report 202386
GOVERNANCE REPORT
Directors’ Remuneration Report continued
Implementation of Policy in 2024
Information on how the Policy will be implemented in 2024 for the Company’s Executive Directors is set out in the statement
from the Remuneration Committee Chair and on pages 74 to 76, including specific details of the agreed salary and ABP.
Thedetails of the LTIP are set out below.
Long Term Incentive Plan 2024 (unaudited)
As noted on page 76, the Committee intends to grant awards under the LTIP to the Executive Directors in the first half of 2024,
in accordance with the Policy. Vesting of these 2024 awards will be subject to the achievement of performance measures based
on total shareholder return performance as compared to the selected benchmark, the FTSE Small Cap index, and adjusted EPS
performance over a three-year performance period ending 31 December 2026.
For each measure, 25% of the award vests for threshold performance with 100% of the award vesting for maximum
performance and straight line vesting between these points.
The performance targets for these measures are as follows:
Weighting
(% of total award)
Threshold
25% Vesting
Maximum
100% Vesting
TSR v FTSE Small Cap Index 20% Median Upper Quartile
Adjusted EPS 80% 13.65 pence 16.10 pence
Chair and Non-Executive Director fees (unaudited)
No changes will be made to the Chair and Non-Executive Director fees for 2024. A breakdown of the fee components for the
Chair and Non-Executive Directors in 2024 is as follows:
Role Fee (per annum) 2024 Fee (per annum) 2023
Chair £120,000 £120,000
Non-Executive Director base fee £50,000 £50,000
Additional fees
Senior Independent Director fee £15,000 £15,000
Chair of the Remuneration Committee £10,000 £10,000
Member of the Remuneration Committee £5,000 £5,000
Chair of the Audit & Risk Committee £10,000 £10,000
Member of the Audit & Risk Committee £5,000 £5,000
Chair of the Nomination Committee £7, 500 £ 7,50 0
Member of the Nomination Committee £3,750 £3,750
On behalf of the Board
Nicola Bruce
Chair of the Remuneration Committee
8 March 2024
Annual Report 2023 Stelrad Group plc 87
The Directors present their report and audited financial
statements of the Group for the year ended 31 December
2023. The Directors’ Report forms part of the management
report as required under the Disclosure Guidance and
Transparency Rules. The Strategic Report, which together
with the Directors’ Report forms the management report,
canbe found on pages 1 to 56 of this Annual Report.
The Directors’ Report for the year ended 31 December
2023 comprises pages 88 to 91 of this Annual Report, in
addition to the following information, which is provided
in other appropriate sections of the Annual Report and is
incorporated by reference, in accordance with section 414C(11)
of the Act, and The Companies (Miscellaneous Reporting)
Regulations 2018:
• The Corporate Governance Report is set out on page 57.
• Information relating to future business developments can
be found throughout the Strategic Report on pages 1 to 56.
• Information on how the Directors have had consideration
for the Company’s stakeholders can be found on pages 22
to 25 of the Strategic Report.
• Information relating to risk management can be found on
pages 48 to 54.
• The going concern and long-term viability statements can
be found on page 55.
• The Group’s global greenhouse gas emissions during the
year can be found on page 32 of the Sustainability Report,
which is located within the Strategic Report.
• The Group is exposed to a number of financial
instrument-related risks; these are discussed in more
detailin note 32 to the consolidated financial statements.
• As required by Listing Rule 9.8.4R, details of the Group’s
long-term incentive schemes can be found in the
Remuneration Report on pages 74 to 87.
• As required by Listing Rule 9.8.4R, details of the Relationship
Agreement with the Major Shareholder can be found
on page 89.
General information
Stelrad Group plc (the “Company”) was incorporated in
England and Wales on 8 October 2021 as a public company,
limited by shares. The Company is incorporated, domiciled
and registered in England and Wales, with its registered office
situated at 69–75 Side, Newcastle upon Tyne, Tyne and Wear,
United Kingdom NE1 3JE.
Stelrad Group plc is a public company limited by shares,
incorporated in England and Wales, and its shares are traded
on the premium listing segment of the Main Market of the
London Stock Exchange.
Principal activities
The Group’s principal activities are the manufacture and
distribution of radiators. The principal activity of the Company
is that of a holding company. More detailed information about
the activities of the Group during the year, and its likely future
prospects, can be found in the Strategic Report on pages 1 to
56. The principal subsidiaries operating within the Group are
shown in note 13 to the Company financial statements.
Profit and dividends
The Group profit for the year, after taxation, amounted to
£15.4million (2022: £4.3 million).
An interim dividend of 2.92 pence per share was paid to
shareholders on 27 October 2023 (2022: interim dividend of
2.92 pence per share) and the Board is recommending a final
dividend in respect of the year ended 31 December 2023 of
4.72 pence per share (2022: final dividend of 4.72 pence per
share). Subject to shareholder approval, the final dividend will
be paid on 29 May 2024 to shareholders on the register on
26April 2024. The total dividend paid and proposed for the
year ended 31 December 2023 amounts to 7.64 pence per share
(2022: 7.64 pence per share).
Articles of Association
The Articles set out the rules relating to the powers of the
Company’s Directors and their appointment and replacement.
The Articles may only be amended by a special resolution at a
general meeting of the shareholders. Shareholders of the Group
can request a copy of the Articles by contacting the Group
Company Secretary, Computershare Governance Services, UK,
at Moor House, 120 London Wall, London EC2Y 5ET.
Share capital
As at 31 December 2023, the Company has one class of
ordinary share with a nominal value of £0.001. The shares
are listed for trading on the Main Market of the London
Stock Exchange, and at 31 December 2023, the Company
had 127,352,555 shares in issue. The shares rank pari passu
in respect of voting and participation and carry the right to
one vote at general meetings of the Company, which may
be exercised by members in person, by proxy or by corporate
representatives (for corporations).
The ordinary shares are free from any restriction on transfer,
subject to compliance with applicable securities laws.
At the Annual General Meeting held on 22 May 2023 shareholders
passed a resolution allowing the Company to make market
purchases of ordinary shares of £0.001 each in the capital of
the Company up to a maximum aggregate amount of 10%
of the Company’s issued share capital. No shares have been
purchased as at the date of this report. This authority is due to
expire at the AGM to be held on 22 May 2024 and the Board
will seek to renew this authority.
Substantial shareholdings
At 31 January 2024, the only notified holdings of substantial
voting rights in respect of the issued share capital of the
Company (which may have altered since the date of such
notification without any requirement for the Company to
have been informed) were:
Shareholder Interest
% of share
capital
The Bregal Fund III LP 63,103,765 49.6%
Trevor Harvey 11,455,129 9.0%
Chelverton Asset Management 7,413,636 5.8%
George Letham 5,727,564 4.5%
Janus Henderson Investors 5,680,464 4.5%
Charles Stanley 4,776,703 3.8%
Unicorn Asset Management 4,664,720 3.7%
Compagnie Odier SCA 4,272,703 3.4%
Stelrad Group plc Annual Report 202388
GOVERNANCE REPORT
Directors’ Report
Relationship agreement with majorshareholder
The Company has entered into a relationship agreement
with the Major Shareholder, The Bregal Fund III LP (the
“Relationship Agreement”). The principal purpose of the
Relationship Agreement is to ensure that where, following
admission, the Major Shareholder, together with its associates,
holds, in aggregate, ordinary shares in the Company representing
at least 10% of the voting rights of the ordinary shares in
issuance by the Company from time to time, the Company
is capable of carrying on its business independently of the
Major Shareholder and its associates.
The provisions of the Relationship Agreement imposing
obligations on the Major Shareholder will remain in full
force and effect, for so long as it, together with its associates,
holds, in aggregate, ordinary shares representing at least
10% of the voting rights of the ordinary shares in issuance
bythe Company.
Under the Relationship Agreement, the Major Shareholder
has agreed that:
(i) transactions and arrangements between it (and/or any
of its associates) and the Company will be conducted at
arm’s length and on normal commercial terms;
(ii) neither it nor any of its associates shall take any action
that would have the effect of preventing the Company
from complying with its obligations under the Listing
Rules; and
(iii) neither it nor any of its associates shall propose or procure
the proposal of a shareholder resolution which is intended
or appears to be intended to circumvent the proper
application of the Listing Rules.
For so long as the Major Shareholder (together with any of
its associates) holds, in aggregate, at least 10% but less than
20% of the voting rights of the ordinary shares, the Major
Shareholder shall be entitled to appoint (and remove and
reappoint) one Non-Executive Representative Director to
the Board, or if the Major Shareholder (together with any of
its associates) holds, in aggregate, 20% or more of the voting
rights of the ordinary shares, then the Major Shareholder
shall be entitled to appoint (and remove and reappoint)
two Non-Executive Representative Directors to the Board.
TheMajor Shareholder’s first appointed shareholder Directors
are Edmund Lazarus and Nicholas Armstrong.
For so long as the Major Shareholder (together with any
of its associates) holds 20% or more of the voting rights of
the ordinary shares, the Major Shareholder is entitled to
nominate a shareholder Director to be a member of the
Nomination Committee. Furthermore, for so long as the
Major Shareholder (together with any of its associates) holds
10% or more of the voting rights of the ordinary shares, the
Major Shareholder is entitled to appoint an observer to each
of the Nomination Committee, Audit & Risk Committee and
Remuneration Committee. The Major Shareholder will not
appoint an observer to the Nomination Committee whilst
ashareholder Director is a member of such Committee.
Subject to applicable law and regulation, the Major Shareholder
will have the benefit of certain information rights, including for the
purposes of its accounting and other regulatory requirements.
In accordance with Listing Rule 9.8.4(14)(c) the Directors
confirm that the Company has complied with the independence
provisions included in the relationship agreement and that,
as far as the Company is aware, the major shareholders (or
any of their associates) have complied with them.
The Relationship Agreement is governed by the laws of
England and Wales.
The Board of Directors
Director biographies of all Directors as at the date of this
report can be found on pages 58 and 59. Annette Borén
was appointed to the Board as Chief Financial Officer on
22 November 2023, replacing George Letham, who retired
from the Board on 22 November 2023. Terry Miller stepped
down from the Board on 31 December 2023 and Katherine
Innes Ker was appointed to the Board as independent
Non-Executive Director and the Senior Independent
Directoron 1February 2024.
The appointment and removal of Directors are governed by
the Articles, the UK Corporate Governance Code 2018, the
Companies Act 2006 and related legislation. All Non-Executive
Director appointments can be terminated by either the
Company or by the individual upon three months’ written
notice. In accordance with the Articles, Directors can
be appointed or removed either by the Board or by the
shareholders in general meeting with immediate effect.
Directors’ interests and conflicts of interest
Details regarding the share interests of the Directors in the
share capital of the Company are set out in the Remuneration
Report on page 84. Details of the Executive Directors’ service
agreements and Non-Executive Directors’ letters of appointment
are available in the Remuneration Report on page 81.
The Group has a formal ongoing procedure for the disclosure,
review and authorisation of Directors’ conflicts of interest.
All Directors are required to make the Board aware of any
other commitments. Potential and actual conflicts of interest
are carefully considered and, if deemed appropriate, the
continuing existence of the potential or actual conflict of
interest may be approved by the Board. All conflicts of interest
are recorded in the conflicts register. The conflicts of interest
are reviewed annually to determine whether they should
remain authorised.
Directors’ indemnities
In relation to the Directors of the Company who are also
Directors of UK-based subsidiaries, the Group has granted
an indemnity to one or more of its Directors against liability
in respect of proceedings brought by third parties, subject
to the conditions set out in the Companies Act 2006. Such
qualifying third party indemnity provisions were in force
during the year ended 31 December 2023 and remain in
forceas at the date of approving the Directors’ Report.
In addition, the Group maintained a Directors’ and officers’
liability insurance policy throughout the year.
Annual Report 2023 Stelrad Group plc 89
Change of control provisions
There are no agreements between the Group and its Directors
or employees providing for compensation for loss of office or
employment that occurs because of a takeover or change of
control of the Group.
Details of the significant agreements to which the Company
is party that take effect, alter or terminate upon a change
of control of the Company following a takeover bid are set
out below:
Share plans
The Company’s share plans contain specific provisions
relating to change of control. Normally, awards will vest
prorata in the event of a change of control of the Company.
The Remuneration Committee will determine whether
theperformance criteria have been met at that time.
Bank agreement
The multicurrency facilities agreement originally dated
2November 2021, and subsequently amended and
restatedby an amendment and restatement agreement
dated 8July2022, contains change of control provisions such
that in the event of the occurrence of a change of control
event, the banks shall have 30 business days to exercise an
individual right to cancel all undrawn commitments on the
facility and to require that all outstanding participations in
utilisations are repaid with accrued interest and any other
relevant amounts accrued.
Relationship Agreement
The Relationship Agreement ceases to apply if the Company’s
shares cease to be listed and traded on the London Stock
Exchange, or if the Major Shareholder, together with any of its
associates, ceases to hold at least 10% of the Company’s shares.
Employee engagement
The Group is committed to involving its employees in the
decisions that affect them. Regular meetings take place
between local management and employees to allow a free
flow of information and ideas. In addition, where practicable,
the Group seeks to keep employees informed through
regular newsletters.
The Board has elected to continue to use a combination of
approaches to gather the views of the workforce, rather than
to adopt one of the three measures set out in the Code.
The majority of employees are located in manufacturing
and distribution facilities in the UK, Turkey, the Netherlands,
Denmark, Poland and Italy, with sales personnel in five other
countries. Given the relatively small number of employees in
each location, the diversity of cultural norms and the differing
statutory requirements for each location, a decentralised
and tailored approach to employee engagement has been
adopted. This encompasses engagement with our employees
through our long-established collective forums, through
our trade union bodies, and directly with our workforce.
TheBoard believes that this, combined with the flat structure
of our business, which enables close working relationships
across the Group, is effective and meaningful in representing
the voice of our employees.
The Board reviews employee engagement using a range of
data. A formal annual review of the workforce, encompassing
employee engagement, is undertaken by the Board, and this
session is attended by the Chief People Officer.
The Group aims to build a culture where everyone feels
valued as an individual and feels supported and motivated
tocarry out their work to the best of their abilities.
Further examples of employee engagement across the Group
can be found in the Sustainability Report on pages 26 to 41.
Equality, diversity and inclusion
The Group is a committed equal opportunities employer
andwe aim to:
• prevent discrimination, eliminate prejudice, promote
inclusion and celebrate diversity within the organisation;
• be fair in our dealings with all people, internally or
externally, with whom we have relationships, taking
into account the diverse nature of their culture and
backgrounds; and
• ensure that equality, diversity and inclusion are embedded
in everything we do.
The Group’s Equality, Diversity and Inclusion Policy covers
all aspects of equality including race, religion or belief,
sex, gender reassignment, marriage and civil partnership,
pregnancy, maternity and other matters relating to parental
responsibility, sexual orientation, disability and age.
It underlines our commitment to develop as an open and
inclusive organisation, in keeping with our values and our
Code of Conduct.
The Board also adheres to the Board Diversity and Inclusion
Policy which can be found in the Nomination Committee
Report on page 71.
Research and development expenditure
Research and development costs of £1.6 million (2022: £1.1 million)
have been incurred in the year in relation to the design and
development of new products. All such costs are expensed
as incurred.
Political donations and expenditure
It is the Group’s policy not to make political donations and,
accordingly, no political donations were made in the year
(2022: £nil) and no political expenditure was incurred during
the year (2022: £nil).
The Group’s policy is that it does not make what are commonly
regarded as donations to any political party. However, the
Companies Act 2006 defines political donations very broadly
and so it is possible that normal business activities, such as
sponsorship, subscriptions, payment of expenses, paid leave
for employees fulfilling certain public duties and support
for bodies representing the business community in policy
review or reform, which might not be thought of as political
expenditure in the usual sense, could be captured. Activities
of this nature would not be thought of as political donations
in the ordinary sense of those words.
At the Annual General Meeting of the Company held on
22May 2023, shareholders voted to allow the Company to
incur political expenditure up to a maximum aggregate
amount of £100,000 in line with market practice. That
authority is due to expire at the Annual General Meeting
due to be held on 22 May 2024 and therefore the Company
will seek to renew the authority in line with the above
considerations. The resolution to be proposed at the 2024
AGM, authorising political donations and expenditure, is to
ensure that the Group does not commit any technical breach
of the Companies Act 2006.
Stelrad Group plc Annual Report 202390
GOVERNANCE REPORT
Directors’ Report continued
Important developments since
31December 2023
There have been no material events or developments
affecting the Company or any of its operating subsidiaries
since 31 December 2023.
Independent auditors
PricewaterhouseCoopers LLP acted as auditors during the
year and a resolution to reappoint PricewaterhouseCoopers
LLP as auditors will be put to the members at the Annual
General Meeting.
Fair, balanced and understandable
In accordance with the principles of the Code, the Group has
processes in place to ensure that the content of the Annual
Report is fair, balanced and understandable. The Directors
consider, on the advice of the Audit & Risk Committee, that
the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s performance, position,
business model and strategy.
Annual General Meeting (“AGM”)
The Company’s AGM will be held at the offices of Investec Bank plc:
30 Gresham Street, London EC2V 7QP, on 22 May 2024 at 4 pm.
The notice convening the AGM will be sent to shareholders
separately. Further information on arrangements for the AGM
and voting instructions will be set out fully in the Notice of
AGM and Form of Proxy.
Statement of Directors’ responsibilities in
respect of thefinancial statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements
in accordance with UK-adopted international accounting
standards and the company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”,
andapplicable law).
Under Company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company and
of the profit or loss of the Group for that period. In preparing
the financial statements, the Directors are required to:
• select suitable accounting policies and then apply
themconsistently;
• state whether applicable UK-adopted international accounting
standards have been followed for the Group financial
statements and United Kingdom Accounting Standards,
comprising FRS 102 have been followed for the Company
financial statements, subject to any material departures
disclosed and explained in the financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the
financial statements and the Directors’ Remuneration Report
comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s and Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and functions are listed in the
Governance Report confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared
in accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Group;
• the Company financial statements, which have been
prepared in accordance with United Kingdom Accounting
Standards, comprising FRS 102, give a true and fair view of the
assets, liabilities and financial position of the Company; and
• the Directors’ Report includes a fair review of the development
and performance of the business and the position of the
Group and Company, together with a description of the
principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors’
report is approved:
• so far as the Director is aware, there is no relevant audit
information of which the Group’s and Company’s auditors
are unaware; and
• they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any
relevant audit information and to establish that the Group’s
and Company’s auditors are aware of that information.
Annette Borén
Chief Financial Officer
8 March 2024
Annual Report 2023 Stelrad Group plc 91
Report on the audit of the financial statements
Opinion
In our opinion:
• Stelrad Group plc’s Group financial statements and
Company financial statements (the “financial statements”)
give a true and fair view of the state of the Group’s and
of the Company’s affairs as at 31 December 2023 and of
the Group’s profit and the Group’s cash flows for the year
then ended;
• the Group financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards as applied in accordance with the
provisions of the Companies Act 2006;
• the Company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards, including FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic
ofIreland”, and applicable law); and
• the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within
the Annual Report, which comprise: the Consolidated
and Company balance sheets as at 31 December 2023;
the Consolidated income statement, the Consolidated
statement of comprehensive income, the Consolidated
and Company statements of changes in equity and
the Consolidated statement of cash flows for the year
then ended; and the notes to the financial statements,
comprising material accounting policy information and
otherexplanatoryinformation.
Our opinion is consistent with our reporting to the Audit
&Risk Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance
with the ethical requirements that are relevant to our audit
of the financial statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in note 8 to the financial
statements, we have provided no non-audit services to
the Company or its controlled undertakings in the period
under audit.
Our audit approach
Overview
Audit scope
• Four trading subsidiaries, together with the parent
company were in-scope for full scope Group reporting.
Inaddition, audit procedures were performed over specific
balances in two other components.
• This accounted for 92% of the total Group revenue
and100% of profit before tax.
• Analytical review was performed over all out of
scopedivisions.
Key audit matters
• Completeness and accuracy of indirect rebates (Group).
• Change in functional currency in Turkey (Group).
• Impairment of goodwill and acquired intangible
assets (Group).
• Carrying value of investments (parent).
Materiality
• Overall Group materiality: £2,300,000 (2022: £1,053,950)
based on 0.75% of Total revenues (2022: 2.5% of Group
Adjusted EBITDA).
• Overall Company materiality: £1,227,000 (2022: £1,321,500)
based on 1% of Total Assets.
• Performance materiality: £1,725,000 (2022: £790,460)
(Group) and £920,250 (2022: £991,125) (Company).
The scope of our audit
As part of designing our audit, we determined materiality
andassessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the
audit of the financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters, and any comments we make on the results of
our procedures thereon, were addressed in the context of our
audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
This is not a complete list of all risks identified by our audit.
Change in Functional Currency in Turkey and Impairment of
Goodwill and Acquired Intangible Assets are new key audit
matters this year. Completeness and valuation of assets and
liabilities in the business combination and Completeness
and accuracy of IAS 29 accounting, which were key audit
matters last year, are no longer included because of the
business combination being a one off event and the change
in functional currency in the component incorporated in the
hyperinflationary environment leading to IAS 29 no longer
being applied. Otherwise, the key audit matters below are
consistent with last year.
Stelrad Group plc Annual Report 202392
FINANCIAL STATEMENTS
Independent auditors’ report to the
members of Stelrad Group plc
Our audit approach continued
Key audit matters continued
Key audit matter How our audit addressed the key audit matter
Completeness and accuracy of indirect
rebates (Group)
Refer to Accounting policies on revenue recognition and note 5 –
Significant accounting judgements, estimates and assumptions.
The UK sales arrangements include installer rebates.
Determining the accrual for installer rebates is a complex area
with a high degree of estimation. This arises as the rebate is
granted on indirect sales and so the sales information is not
readily available at the time the accrual needs to be determined.
As such, historical rates in relation to take up (number of radiators
for which a rebate has been claimed) and poundage (the rebate
value claimed per radiator), as well as management judgement,
are used in calculating the accrual for indirect rebates.
We identified this as a key audit matter due to the subjectivity
involved, the potential for manipulation and because of the
impact it has on revenue recognised.
To audit the indirect rebates accrual we have:
• Corroborated the sales volumes data included in management’s calculations of
historic take up and poundage rates to sales during the year;
• Corroborated the volume and value of rebate claims on radiators sold included
in management’s calculation of historic take up and poundage rates to settled
rebate claims;
• Performed sensitivity analysis over management’s take up and poundage
assumptions to challenge the reasonableness of any management overlay to
the assumptions; and
• Performed lookback testing to determine the accuracy of managements
estimate in prior periods.
Through our work performed we did not identify any issues.
Change in functional currency in Turkey (Group)
Refer to note 5 – Significant accounting judgements, estimates
and assumptions. Following a change in the strategic focus of
the Group’s Turkish business, the Directors decided that it was
necessary to determine whether a change was required to the
functional currency of the Turkish business due to a change
in its currency profile. The Directors reached the conclusion
that the functional currency should change from Turkish
Lira to Euro.
We identified this as a key audit matter due to the significant
judgement involved in determining whether or not there had
been a change in the underlying transactions, events and
conditions pertaining to the Turkish business, the subjectivity
involved in the consideration of primary and secondary factors
outlined in IAS 21 The effects of changes in exchange rates in
deciding that Euro is the functional currency.
In auditing the Director’s conclusions that there had been a change in the
underlying transactions, events and conditions pertaining to the Turkish business
and their conclusion that Euro is the functional currency we performed the following:
• We challenged management regarding the trigger point/change in
circumstances leading to the assessment in change in functional currency
including the view that the Turkish business is now an export business. In doing
this we corroborated the shift in manufacturing profile of the wider Group to
greater Turkish production and corroborated the installation of the new lines in
Turkey to expand export sales;
• We corroborated the change in currency profile of sales and expenses in the
Turkish business to supporting documentation;
• We corroborated the use of forward exchange contracts to purchase Euros using
GBP obtained from GBP sales and to use Euros to purchase USD to settle USD
cost of sales transactions. In doing this we confirmed the Director’s assertion
that cash flows from operations are predominantly retained in Euros and the
Turkish business predominantly operates in Euros; and
• We corroborated other assertions made by the Directors including financing
for the Turkish business being in Euros and capital expenditure predominantly
being incurred in Euros.
In reaching our conclusion from our audit work performed we did challenge
management on alternatives but consider that, whilst a critical judgement, the
conclusion reached by the Directors is reasonable.
Impairment of goodwill and acquired intangible
assets (Group)
Refer to note 18 – Intangible assets. Goodwill related to the
acquisition of Radiators SpA, completed in the prior year, are
not amortised and are subject to annual impairment testing.
Management identified an impairment indicator due to a
decline in performance of Radiators SpA in the current year.
An impairment assessment was prepared by management
analysing the carrying amount of the Radiators SpA ‘Cash
Generating Unit’ (“CGU”) against its value-in-use. Value-in-use
is calculated as the net present value of that CGU’s discounted
future pre tax cash flows based on budgeted cash flows
information for a period of three years and then long term
assumptions to cover into perpetuity.
We identified this as a key audit matter due to the increased
risk of impairment due to the impairment indicators identified
and the use of key assumptions which are inherently subjective.
We obtained management’s assessment of impairment indicators and agree with the
conclusion that impairment indicators exist for the Radiators SpA CGU. We obtained
management’s value in use assessment and performed the following audit procedures:
• Agreed the cash flow forecasts to the Board approved budgets for Radiators SpA;
• Testing the build up of cash flow models to ensure value in use calculations
were prepared in accordance with the requirements defined in applicable
accounting standards;
• Challenged the discount rate and long-term growth rate assumptions with
support from our PwC valuation experts;
• Challenged the cash flow assumptions including revenue growth, EBITDA
margin, working capital and capital expenditure;
• Obtained corroborating support for key assumptions, with particular focus on
the EBITDA margin which is the most sensitive assumption;
• Obtained corroborating evidence for existence, demand and profitability
assumptions for new products and ensured inclusion in the impairment model
is appropriate based on the requirements of IAS 36;
• Considered management’s forecasts against historical performance of Radiators
SpA and considered management’s historical forecasting accuracy;
• Obtained independent market data for Radiators SpA sales markets to consider
if any inconsistencies in views being taken by management; and
• Checked the disclosures in relation to the impairment test, including
consideration of reasonable changes in key assumptions, are in line with the
requirements of IAS 1 and IAS 36.
Through our work performed we did not identify anything that would indicate that
the carrying value is materially incorrect.
Annual Report 2023 Stelrad Group plc 93
Key audit matter How our audit addressed the key audit matter
Carrying value of investments (parent)
Within the parent company (note 9) there are investments
in subsidiaries of £115,908,000. The quantum of these
investments is significant to the parent company’s balance
sheet and it is necessary for management to consider whether
or not there are any indications of impairment.
Due to the quantum of the investments in subsidiaries and
the judgement involved in assessing impairment indicators
we identified this as a key audit matter.
Management performed an assessment of the impairment indicators as set out
in IAS 36 as at year end date and concluded there were no indicators present,
other than that related to Radiators SpA noted above, hence an assessment of
impairment was not required for the investment in the Group.
• We obtained this assessment and performed the following to challenge
management’s assessment that there were no indicators:
• Considered the trading performance of trading subsidiaries in the year and how
this compared to historic trading;
• Reviewed Board minutes for anything which might indicate there could be an
impairment;
• Considered the audit work carried out over subsidiary companies in the Group; and
• Considered the impairment test carried out by management over the Radiators
SpA cash-generating unit.
In performing these procedures we did not identify any issues. We also consider the
disclosures made in the financial statements to be appropriate.
Our audit approach continued
Key audit matters continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the
structure of the Group and the Company, the accounting
processes and controls, and the industry in which they operate.
The Group is based in the UK with the majority of the trading
operations in the UK, Turkey, Italy and Continental (Belgium
and the Netherlands). All trading entities are in scope for the
Group audit given the financial significance of each operation
with full scope audit procedures carried out on each one.
Certain large balances for smaller, non financially significant
components, were audited by the Group team along with
material consolidation entries. Furthermore, all UK entities
receive a statutory audit.
The UK component was audited by the Group team.
Component auditors were engaged for the Continental,
Italy and Turkey components. The key protocols we adopted
in respect of working with all component auditors were:
issuing formal Group reporting instructions, which set out
our requirements for the component auditors, together with
our assessment of audit risks in the Group; holding planning
discussions with all component auditors in order to agree
those requirements; discussing the Group audit risks to
identify any component specific risks; high level analysis of
the financial information of the component by the Group
engagement team to identify any unusual transactions or
balances for discussion with component auditors; ongoing
communication and interaction throughout the audit
with the component audit teams; and obtaining signed
interoffice opinions that the component financial information
was properly prepared in accordance with the Group’s
accounting policies.
The Audit Partner visited the Turkey and Italy components
in order to better understand and direct the response to
the significant audit risks identified for those components.
This included meeting with local PwC audit teams, local
management and touring the facilities.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to
understand the extent of the potential impact of climate risk
on the Group’s and Company’s financial statements, and we
remained alert when performing our audit procedures for any
indicators of the impact of climate risk. Our procedures did
not identify any material impact as a result of climate risk on
the Group’s and Company’s financial statements.
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and
in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:
Stelrad Group plc Annual Report 202394
FINANCIAL STATEMENTS
Independent auditors’ report to the members
ofStelradGroup plc continued
For each component in the scope of our Group audit, we
allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components
was between £500,000 and £1,800,000. Certain components
were audited to a local statutory audit materiality that was
also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining
the scope of our audit and the nature and extent of our
testing of account balances, classes of transactions and
disclosures, for example in determining sample sizes.
Ourperformance materiality was 75% (2022: 75%) of overall
materiality, amounting to £1,725,000 (2022: £790,460) for the
Group financial statements and £920,250 (2022: £991,125) for
the Company financial statements.
In determining the performance materiality, we considered
a number of factors – the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls – and concluded that an amount in the middle of our
normal range was appropriate.
We agreed with the Audit & Risk Committee that we would
report to them misstatements identified during our audit
above £116,000 (Group audit) (2022: £53,000) and £61,000
(Company audit) (2022: £48,000) as well as misstatements
below those amounts that, in our view, warranted reporting
for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the Directors’ assessment of the Group’s
and the Company’s ability to continue to adopt the going
concern basis of accounting included:
• Performing a risk assessment to identify factors that could
impact the going concern basis of accounting;
• Obtaining management’s going concern assessment for
the period from the date of signing the Annual Report to
December 2026 and evaluating management’s downside
scenarios, including a severe but plausible scenario;
• Challenging the appropriateness and underlying
assumptions in both the base case and severe but
plausible scenario;
• Evaluating the level of forecast liquidity and forecast
compliance with the bank facility covenants; and
• Comparing the Group’s financial forecasts to historical
performance to assess management’s ability to forecast
as well as assessing the year to date performance against
budget for the 2024 financial year.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on
the Group’s and the Company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Group’s
and the Company’s ability to continue as a going concern.
In relation to the Directors’ reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the Directors’ statement in the financial statements about
whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in
the Annual Report other than the financial statements and
our auditors’ report thereon. The Directors are responsible
for the other information. Our opinion on the financial
statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to
the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements,
ourresponsibility is to read the other information and,
in doing so, consider whether the other information is
materiallyinconsistent with the financial statements or
ourknowledge obtained in the audit, or otherwise appears
tobe materially misstated. If we identify an apparent
materialinconsistency or material misstatement, we are
required to perform procedures to conclude whether
thereisa material misstatement of the financial statements
or a material misstatement of the other information.
Our audit approach continued
Materiality continued
Financial statements – Group Financial statements – Company
Overall materiality £2,300,000 (2022: £1,053,950). £1,227,000 (2022: £1,321,500).
How we determined it 0.75% of Total revenues (2022: 2.5% of Group
Adjusted EBITDA).
1% of Total Assets.
Rationale for
benchmark applied
The change in the benchmark was driven from
the increased scale of the Group as a result of the
acquisition in the prior year. Due to the mix of profit and
EBITDA across the different components within the
Group the EBITDA metric, used in the prior year, didn’t
reflect the increased scale of the Group in the same
way. We consider revenue is a key measure used by the
shareholders in assessing the performance of the Group.
We believe that total assets is the primary
measure used by the shareholders
in assessing the performance of the
Company and is a generally accepted
auditing benchmark for a holding
company with no trading operations.
Annual Report 2023 Stelrad Group plc 95
Reporting on other information continued
If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report
based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic report
and Directors’ Report for the year ended 31 December 2023
is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group
and Company and their environment obtained in the course
of the audit, we did not identify any material misstatements
in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the Directors’
statements in relation to going concern, longer-term viability
and that part of the corporate governance statement relating
to the Company’s compliance with the provisions of the
UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate
governance statement as other information are described in
the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
corporate governance statement is materially consistent with
the financial statements and our knowledge obtained during
the audit, and we have nothing material to add or draw
attention to in relation to:
• The Directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
• The Directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the Group’s
and Company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the
financial statements;
• The Directors’ explanation as to their assessment of
the Group’s and Company’s prospects, the period this
assessment covers and why the period is appropriate; and
• The Directors’ statement as to whether they have a
reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the Directors’ statement regarding the
longer-term viability of the Group and Company was
substantially less in scope than an audit and only consisted
of making inquiries and considering the Directors’ process
supporting their statement; checking that the statement is
in alignment with the relevant provisions of the UK Corporate
Governance Code; and considering whether the statement is
consistent with the financial statements and our knowledge
and understanding of the Group and Company and their
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of
our audit, we have concluded that each of the following
elements of the corporate governance statement is materially
consistent with the financial statements and our knowledge
obtained during the audit:
• The Directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for the members to assess the Group’s and Company’s
position, performance, business model and strategy;
• The section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems; and
• The section of the Annual Report describing the work of the
Audit & Risk Committee.
We have nothing to report in respect of our responsibility
to report when the Directors’ statement relating to the
Company’s compliance with the Code does not properly
disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements
and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’
responsibilities in respect of the financial statements, the
Directors are responsible for the preparation of the financial
statements in accordance with the applicable framework
and for being satisfied that they give a true and fair view.
TheDirectors are also responsible for such internal control
as they determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the
financialstatements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Stelrad Group plc Annual Report 202396
FINANCIAL STATEMENTS
Independent auditors’ report to the members
ofStelradGroup plc continued
Responsibilities for the financial statements and
the audit continued
Auditors’ responsibilities for the audit of the
financialstatements continued
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we
identified that the principal risks of non-compliance with
laws and regulations related to health and safety regulations,
and we considered the extent to which non-compliance
might have a material effect on the financial statements.
We also considered those laws and regulations that have
a direct impact on the financial statements such as UK
Listing Rules, Companies Act 2006 and corporation tax
legislation. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and
determined that the principal risks were related to posting
inappropriate journal entries to increase revenue and EBITDA
and management bias in accounting estimates. The Group
engagement team shared this risk assessment with the
component auditors so that they could include appropriate
audit procedures in response to such risks in their work. Audit
procedures performed by the Group engagement team and/
or component auditors included:
• Discussions with management, including consideration
of known or suspected instances of non-compliance with
laws and regulation and fraud;
• Review of minutes of meetings of the Board of Directors
and the Audit and Risk Committee;
• Evaluation of management’s controls designed to prevent
and detect irregularities due to fraud or error;
• Challenging assumptions and judgements made by
management in their significant accounting estimates, in
particular in relation to the accounting for indirect rebates,
functional currency in the Turkish business and the
Radiators SpA impairment assessment (refer to Key Audit
Matters on page 93);
• Identifying and testing journal entries, in particular any
journals posted with unusual account combinations with a
particular focus on revenue and EBITDA; and
• Obtaining an understanding of the legal and regulatory
framework applicable to the Group and how the Group is
complying with that framework.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• we have not obtained all the information and explanations
we require for our audit; or
• adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• the Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit & Risk Committee,
we were appointed by the members on 15 December 2021 to
audit the financial statements for the year ended 31 December
2021 and subsequent financial periods. The period of total
uninterrupted engagement is three years, covering the years
ended 31 December 2021 to 31 December 2023.
Other matter
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these
financial statements will form part of the ESEF-prepared
annual financial report filed on the National Storage
Mechanism of the Financial Conduct Authority in accordance
with the ESEF Regulatory Technical Standard (“ESEF RTS”).
This auditors’ report provides no assurance over whether
the annual financial report will be prepared using the single
electronic format specified in the ESEF RTS.
Paul Cheshire (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne
8 March 2023
Annual Report 2023 Stelrad Group plc 97
20232022
Note£’000£’000
Continuing operations
Revenue
6
30 8 , 193
316 , 31 5
Cost of sales (excluding exceptional items)
(2 21 , 3 4 3)
(2 35 ,19 4)
Exceptional items
6
—
(1,05 4)
Cost of sales
(2 21 , 3 4 3)
(236,248)
Gross profit
86 ,85 0
80,0 67
Selling and distribution expenses
(42 , 278)
(4 0, 8 0 0)
Administrative expenses (excluding exceptional items)
(16 , 6 2 4)
(1 2 , 811)
Exceptional items
6
(2 , 466)
(755)
Administrative expenses
(19, 0 9 0)
(13,566)
Other operating income/(expenses)
7
1 , 19 9
(3,0 73)
Operating profit
8
26 , 6 81
22,628
Finance income
12
18 2
50
Finance costs
13
(7 ,68 1)
(4 , 57 3)
Monetary losses – net
30
—
(7, 8 6 0)
Profit before tax
19,18 2
10 , 24 5
Income tax expense
14
(3 ,75 8)
(5 ,93 6)
Profit for the year
15, 42 4
4, 309
Note
2023
2022
Earnings per share
Basic
15
1 2 . 11p
3. 3 8p
Diluted
15
1 2 . 11p
3. 3 8p
Adjusted earnings per share
Basic
15
13 .62p
19. 11p
Diluted
15
13. 62p
1 9. 11p
Stelrad Group plc Annual Report 202398
FINANCIAL STATEMENTS
Consolidated income statement
for the year ended 31 December 2023
20232022
Note£’000£’000
Profit for the year
15, 42 4
4, 309
Other comprehensive income/(expense)
Other comprehensive income/(expense) that may be reclassified
to profit or loss in subsequent periods:
Net gain on monetary items forming part of net investment in foreign
operations andqualifying hedges of net investments in foreign operations
6 74
1 , 691
Income tax effect
14
(1 58)
(6 31)
Exchange differences on translation of foreign operations
(2 , 250)
(5 , 9 41)
Net other comprehensive expense that may be reclassified
to profit or loss in subsequent periods
(1 ,7 3 4)
(4 , 8 81)
Other comprehensive expense not to be reclassified
to profit or loss in subsequent periods:
Remeasurement losses on defined benefit plans
28
(93 6)
(1 , 932)
Income tax effect
14
206
42 3
Net other comprehensive expense not to be reclassified
to profit or loss in subsequent periods
(73 0)
(1, 50 9)
Other comprehensive expense for the year, net of tax
(2 , 4 6 4)
(6 , 39 0)
Total comprehensive income/(expense) for the year,
net of tax attributable to owners of the parent
12 , 9 6 0
(2 , 0 81)
Annual Report 2023 Stelrad Group plc 99
Consolidated statement of comprehensive income
for the year ended 31 December 2023
20232022
Note£’000£’000
Assets
Non-current assets
Property, plant and equipment
17
8 7, 2 47
91 , 6 0 4
Intangible assets
18
5 , 2 51
3, 855
Trade and other receivables
22
3 01
3 17
Deferred tax assets
14
6 ,6 85
5 , 39 7
99, 4 8 4
101 , 17 3
Current assets
Inventories
21
63 , 376
7 7, 8 51
Trade and other receivables
22
5 0 , 6 74
60,497
Income tax receivable
243
235
Cash and cash equivalents
23
2 1,442
2 2 , 6 41
135,735
161 , 2 24
Total assets
2 3 5 , 21 9
26 2 , 39 7
Equity and liabilities
Equity
Share capital
26
127
127
Share premium
26
—
—
Merger reserve
(1 14, 4 69)
(1 1 4,469)
Retained earnings
233, 329
2 2 7, 8 4 9
Foreign currency reserve
(6 3 ,7 9 2)
(62 ,05 8)
Total equity
55 ,19 5
51 ,4 49
Non-current liabilities
Interest-bearing loans and borrowings
20
8 8 , 2 27
9 8 , 513
Deferred tax liabilities
14
21 8
2 , 611
Provisions
25
1,980
1, 799
Net employee defined benefit liabilities
28
4 , 053
4 , 5 42
9 4 , 47 8
10 7, 4 6 5
Current liabilities
Trade and other payables
24
78, 056
9 9 , 2 14
Financial liabilities
20
31 8
—
Interest-bearing loans and borrowings
20
2 , 469
1 , 520
Income tax payable
1,68 6
1, 8 29
Provisions
25
3 , 0 17
920
85, 54 6
10 3 , 4 8 3
Total liabilities
180 ,0 24
210 , 9 4 8
Total equity and liabilities
2 3 5 , 21 9
26 2 , 39 7
The financial statements on pages 98 to 138 were approved by the Board of Directors on 8 March 2024 and signed on its
behalf by:
Annette Borén
Chief Financial Officer
Stelrad Group plc Annual Report 2023100
FINANCIAL STATEMENTS
Consolidated balance sheet
as at 31 December 2023 (Registered Number 13670010)
Attributable to the owners of the parent
Issued shareShareMergerRetainedForeign
capitalpremiumreserveearningscurrencyTotal
£’000£’000£’000£’000£’000£’000
At 1 January 2022
1 2 7, 3 5 3
1 3 , 391
(1 1 4,4 69)
5 7, 8 14
(57,177)26 , 91 2
IAS 29 adjustment (note 30)
—
—
—
8 , 327
—
8, 327
At 1 January 2022 (restated)
1 2 7, 3 5 3
1 3 , 391
(1 1 4,469)
6 6 , 141
(5 7, 17 7 )
35 , 2 39
Profit for the year
—
—
—
4, 309
—
4,30 9
Other comprehensive expense
fortheyear
—
—
—
(1 , 50 9)
(4 , 8 81)
(6 , 39 0)
Total comprehensive income/
(expense)
—
—
—
2,800
(4 , 8 81)
(2 , 0 81)
Capital reduction
(127,226)
(1 3 , 391)
—
14 0 , 617
—
—
IAS 29 adjustment to retained earnings
in the year (note 30)
—
—
—
22,9 82
—
22,9 82
Share-based payment charge (note 11)
—
—
—
25 0
—
250
Dividends paid (note 16)
—
—
—
(4 , 9 41)
—
(4 , 9 41)
At 31 December 2022
127
—
(1 1 4,4 69)
2 2 7, 8 49
(62,05 8)
51 , 4 49
Profit for the year
—
—
—
15, 42 4
—
15, 424
Other comprehensive expense
fortheyear
—
—
—
(730)
(1 ,7 3 4)
(2 , 4 6 4)
Total comprehensive income/
(expense)
—
—
—
14 ,69 4
(1 ,7 3 4)
12 , 9 6 0
Share-based payment charge (note 11)
—
—
—
51 5
—
51 5
Dividends paid (note 16)
—
—
—
(9,729)
—
(9,729)
At 31 December 2023
127
—
(1 14, 4 69)
233, 329
(6 3 ,7 9 2)
55 , 195
Annual Report 2023 Stelrad Group plc 101
Consolidated statement of changes in equity
for the year ended 31 December 2023
Note
20232022
£’000£’000
Operating activities
Profit before tax
19 ,1 82
10 , 24 5
Adjustments to reconcile profit before tax to net cash flows:
– Depreciation of property, plant and equipment
17
11 , 6 1 5
9 ,7 0 0
– Amortisation of intangible assets
18
4 57
16 3
– Loss/(gain) on disposal of property, plant and equipment
11
(2 20)
– Monetary loss IAS 29
30
—
7, 8 6 0
– IAS 29 – inflation adjustment before taxation
—
3, 530
– Share-based payments charge
515
250
– Finance income
12
(1 82)
(50)
– Finance costs
13
7, 6 8 1
4 , 57 3
Working capital adjustments:
– Decrease in trade and other receivables
8 , 2 37
1,63 2
– Decrease in inventories
12 , 8 8 4
5 , 8 31
– Decrease in trade and other payables
(20,364)
(11 , 52 8)
– Increase/(decrease) in provisions
2 , 21 4
(1, 29 7)
– Movement in other financial liabilities
319
—
– Decrease in other pension provisions
(7)
(23)
– Difference between pension charge and cash contributions
(1 , 6 74)
(31 9)
40,888
3 0 , 3 47
Income tax paid
(7, 4 9 7)
(3 , 8 01)
Interest received
182
50
Net cash flows generated from operating activities
3 3 , 573
2 6 , 59 6
Investing activities
Proceeds from sale of property, plant, equipment and intangible assets
352
316
Purchase of property, plant and equipment
17
(6 , 5 86)
(9 ,6 71)
Purchase of intangible assets
18
(50 7)
(16 4)
Business combination of subsidiaries, net of cash acquired
19
—
(20,4 8 4)
Net cash flows used in investing activities
(6 , 74 1)
(30,003)
Financing activities
Transaction costs related to refinancing
(5 0 0)
(42 9)
Proceeds from external borrowings
—
34,12 2
Repayment of external borrowings
(8 , 35 0)
(1,250)
Repayment of borrowings acquired with subsidiary
—
(10 ,74 6)
Payment of lease liabilities
(2 , 619)
(2 , 0 49)
Interest paid
(6 , 428)
(3 , 269)
Dividends paid
16
(9,729)
(4 , 9 41)
Net cash flows (used in)/generated from financing activities
(2 7, 6 2 6)
11 , 4 3 8
Net (decrease)/increase in cash and cash equivalents
(7 9 4)
8 , 0 31
Net foreign exchange difference
(40 5)
(953)
Cash and cash equivalents at 1 January
23
22 , 6 41
15, 56 3
Cash and cash equivalents at 31 December
23
2 1,442
2 2 , 6 41
Stelrad Group plc Annual Report 2023102
FINANCIAL STATEMENTS
Consolidated statement of cash flows
for the year ended 31 December 2023
1 Corporate information
The consolidated financial statements of Stelrad Group plc and its subsidiaries (collectively, the “Group”) for the year ended
31 December 2023 were authorised for issue by the Board of Directors on 8 March 2024.
Stelrad Group plc (the “Company”) was incorporated in England and Wales on 8 October 2021 as a public company, limited
by shares. The Company is incorporated, domiciled and registered in England and Wales, with its registered office situated
at 69–75 Side, Newcastle upon Tyne, Tyne and Wear, United Kingdom NE1 3JE.
The principal activity of the Group is the manufacture and distribution of radiators. The principal activity of the Company is that
of a holding company.
2 Basis of preparation
The consolidated financial statements of Stelrad Group plc have been prepared in accordance with UK adopted international
accounting standards in conformity with the requirements of the Companies Act 2006 and the disclosure guidance and
transparency rules sourcebook of the United Kingdom’s Financial Conduct Authority .
The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments
which, where used, are measured at fair value. The consolidated financial statements are presented in GB Pounds and all
values are rounded to the nearest thousand (£’000), except when otherwise indicated. The consolidated financial statements
have been prepared on a going concern basis. Details of the going concern assessment can be found in the Strategic Report
on page 55.
3 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at
31 December 2023. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power over the investee.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are
included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases
to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line
with the Group’s accounting policies. All intra-Group assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.
4 Summary of significant accounting policies
The accounting policies outlined below have been applied consistently, other than where new policies have been adopted.
A. Current versus non-current classification
The Group presents assets and liabilities in the balance sheet based on current/non-current classification. An asset is current
when it is:
• expected to be realised or intended to be sold or consumed in the normal operating cycle;
• expected to be realised within twelve months after the reporting period; or
• cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after
the reporting period.
All other assets are classified as non-current.
A liability is current when:
• it is expected to be settled in the normal operating cycle;
• it is due to be settled within twelve months after the reporting period; or
• there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets
and liabilities.
B. Fair value measurement
The Group measures financial instruments, such as derivatives, at fair value at each balance sheet date. The fair values of
financial instruments measured at amortised cost are disclosed in note 32.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:
• in the principal market for the asset or liability; or
• in the absence of a principal market, in the most advantageous market for the asset or liability.
Annual Report 2023 Stelrad Group plc 103
Notes to the consolidated financial statements
for the year ended 31 December 2023
4 Summary of significant accounting policies continued
B. Fair value measurement continued
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset
in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole:
• Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
• Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly
or indirectly observable.
• Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
C. Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are
presented in GB Pounds (£), which is the Company’s functional and the Group’s presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement, except when deferred in other comprehensive income/(expense)
as qualifying net investment hedges or because the monetary asset or liability forms part of the net investment in the
foreign operation.
Foreign exchange gains and losses are presented in other operating income/(expenses) within the income statement.
Group companies
The results and financial position of all the Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
• income and expenses for each income statement are translated at average exchange rates (except when the functional
currency is a hyperinflationary currency and the closing rate is used – see note 4(Q)); and
• all resulting exchange differences are recognised in other comprehensive income/(expense).
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of
borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive
income/(expense).
D. Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue
can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the
consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
The Group has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the
revenue arrangements, has pricing latitude and is also exposed to inventory and credit risks.
Stelrad Group plc Annual Report 2023104
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
4 Summary of significant accounting policies continued
D. Revenue recognition continued
In accordance with IFRS 15 Revenue from Contracts with Customers, the Group follows a five-step process to determine
whether to recognise revenue:
1. Identifying the contract with a customer.
2. Identifying the performance obligations.
3. Determining the transaction price.
4. Allocating the transaction price to its performance obligations.
5. Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is recognised at a point in time, when the Group satisfies performance obligations by transferring the promised goods
or services to its customers, which is upon delivery of the goods to customers.
The specific recognition criteria described below must also be met before revenue is recognised.
Interest income
For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (“EIR”).
Rebates
Rebates are paid to certain direct customers and end consumers of goods sold (end consumers being installers, contractors
or housebuilders which install the Group’s products). Rebates represent either: an agreed percentage discount on the gross
invoice value of each purchased product; or less frequently an agreed discount based on annual sales volume incentives.
Estimated rebates to direct customers are based upon the terms of sales contracts and are recorded in the same period
as the related gross sale as a deduction from revenue. Where rebates are volume related, these are recognised when the
associated targets are met or deemed likely to be met, with the expected outcome being reassessed at each reporting date.
Volume rebates result in variable revenue; in accordance with IFRS 15, recognition of volume rebates is only made when it is
highly probable that a significant reversal will not occur. For indirect rebates paid to the end consumer, the Group estimates
the rebates based on historical take-up rates and rebate values per product category to ensure it is highly probable that a
significant reversal would not occur. Rebates paid to direct customers are offset against trade receivables whereas indirect
rebates, which are payable to the end consumer, are disclosed as other payables.
E. Taxation
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date in the countries where the Group operates and generates taxable income.
Current income tax is recognised in income unless it relates to items recognised in other comprehensive income/(expense)
or directly in equity, in which case the current income tax is recognised in other comprehensive income/(expense) or directly
in equity respectively. Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
• when the deferred tax liability arises from the initial recognition of goodwill (taxable temporary differences only) or an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
• in respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal
of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any
unused tax losses.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
• when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; or
• in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are
recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
Annual Report 2023 Stelrad Group plc 105
4 Summary of significant accounting policies continued
E. Taxation continued
Deferred tax continued
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that
future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax is recognised in income unless it relates to items recognised in other comprehensive income/(expense) or
directly in equity, in which case the deferred tax is recognised in other comprehensive income/(expense) or directly in
equity respectively.
F. Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment
losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for
long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment
are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and
depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of
the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are
recognised in profit or loss as incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives as follows:
Freehold buildings – 10 to 50 years
Leasehold buildings – period of lease
Plant and equipment – 3 to 10 years
Fixtures, fittings and motor vehicles – 2 to 5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An
asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Assets under construction are transferred to the appropriate category of property, plant and equipment upon completion of a
project. Depreciation commences upon transfer.
See note 4(N)(i) for the accounting policy related to right-of-use assets.
G. Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
consideration transferred measured at acquisition date. When the Group acquires a business, it assesses the financial assets
and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred over the fair values of
net identifiable assets acquired, liabilities assumed and contingent liabilities.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-
generating units that are expected to benefit from the combination.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the
goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the
gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed
operation and the portion of the cash-generating unit retained.
H. Intangible assets – other
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy
the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair
value at the business combination date.
The fair value of customer relationships acquired and recognised as part of a business combination is determined using the
multiperiod excess earnings method.
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses.
Stelrad Group plc Annual Report 2023106
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
4 Summary of significant accounting policies continued
H. Intangible assets – other continued
Research and development
Research costs are expensed as incurred.
Other intangible assets purchased or produced internally are recorded as assets when the use of the asset is likely to generate
future economic benefits and when the cost of the asset can be determined in a reliable manner. These assets are valued at
the cost of purchase or production and amortised at constant rates over their estimated useful life.
Subsequent measurement of intangible assets
Intangible assets with a finite life are amortised on a straight-line basis over their estimated useful lives as follows:
Technology and software costs – 4 years
Customer relationships – 13 years
The estimated useful life and amortisation methods are reviewed at the end of each reporting period, with the effect of any
changes in estimates being accounted for on a prospective basis.
I. Financial instruments – initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity.
i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss or at amortised cost,
as appropriate. With the exception of trade receivables, which are recognised at transaction price, all financial assets are
recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction
costs that are attributable to the acquisition of the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention
in the marketplace (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or
sell the asset.
Subsequent measurement
For the purposes of subsequent measurement, financial assets of the Group are classified in two categories:
• financial assets at fair value through profit or loss; and
• financial assets at amortised cost (debt instruments).
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon
initial recognition at fair value through profit or loss.
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following
conditions are met:
• the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest rate (“EIR”) method and are subject
to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost include trade receivables.
Derecognition
A financial asset is primarily derecognised (i.e. removed from the Group’s consolidated balance sheet) when the rights to
receive cash flows from the asset have expired, or the Group has transferred its rights to receive cash flows from the asset.
ii) Impairment of financial assets
The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and
all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The
expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to
the contractual terms.
Trade receivables are the Group’s only financial asset for which ECLs need to be calculated; for these the Group applies the
simplified approach permitted under IFRS 9 for calculating ECLs. Therefore, the Group does not track changes in credit risk,
but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision
matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the
economic environment.
Annual Report 2023 Stelrad Group plc 107
4 Summary of significant accounting policies continued
I. Financial instruments – initial recognition and subsequent measurement continued
iii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and
borrowings or payables, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial
guarantee contracts and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
This category also includes derivative financial instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships as defined by IFRS 9.
Gains or losses on liabilities held for trading are recognised in the income statement.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of
recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at fair value
through profit or loss.
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the
liabilities are derecognised.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included as finance costs in the income statement.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the
income statement.
J. Derivative financial instruments
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its
foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognised at fair
value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are
carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss.
For the purpose of hedge accounting, hedges are classified as:
• hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which
the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument and the hedged item, the nature of the risk being
hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements
(including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship
qualifies for hedge accounting if it meets all of the following effectiveness requirements:
• there is “an economic relationship” between the hedged item and the hedging instrument;
• the effect of credit risk does not “dominate the value changes” that result from that economic relationship; and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the
Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity
of hedged item.
Stelrad Group plc Annual Report 2023108
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
4 Summary of significant accounting policies continued
J. Derivative financial instruments continued
Initial recognition and subsequent measurement continued
Hedges that meet all the qualifying criteria for hedge accounting are accounted for as described below:
Hedges of a net investment
Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the
net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to
the effective portion of the hedge are recognised as other comprehensive income/(expense) while any gains or losses relating
to the ineffective portion are recognised in the income statement. On disposal of the foreign operation, the cumulative value
of any such gains or losses recorded in equity is transferred to the income statement.
The Group uses a loan as a hedge of its exposure to foreign currency risk.
K. Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
• raw materials: purchase cost on a first in, first out basis; and
• finished goods and work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based
on the normal operating capacity, but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
L. Impairment of non-financial assets
Intangible assets, including goodwill, that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or circumstances
indicate that the carrying amount may not be recoverable.
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU’s”) fair value less costs of disposal and its
value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining
fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified,
an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded companies or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for
each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a
period of three years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the
third year.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount,
where the recoverable amount is the higher of the asset’s fair value less costs of disposal and value in use. Impairment losses
of continuing operations, including impairment on inventories, are recognised in the income statement in expense categories
consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that
previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the
asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is
limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such
reversal is recognised in the income statement.
M. Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original
maturity of three months or less.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term
deposits, as defined above, net of outstanding bank overdrafts.
N. Leases
The Group assesses at contract inception whether a contract is, or contains, a lease – that is, if the contract conveys the right to
control the use of an identified asset for a period of time in exchange for consideration.
Annual Report 2023 Stelrad Group plc 109
4 Summary of significant accounting policies continued
N. Leases continued
Group as lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low
value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use
the underlying assets.
i) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial
direct costs incurred and lease payments made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives
of the assets, as follows:
Leasehold buildings – period of lease
Plant and machinery – 3 to 10 years
Fixtures, fittings and motor vehicles – 2 to 5 years
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase
option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (L) Impairment of
non-financial assets.
ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts
expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects
the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised
as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement
date because the interest rate implicit in the lease is not readily determinable. The incremental borrowing rate is calculated
based on the Group’s external borrowing rate. After the commencement date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities
is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future
payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment
of an option to purchase the underlying asset.
The Group’s lease liabilities are included in the interest-bearing loans and borrowings (see note 20).
iii) Short-term leases and leases of low value assets
The Group applies the short-term lease recognition exemption to its short-term leases of plant and machinery (i.e. those leases
that have a lease term of twelve months or less from the commencement date and do not contain a purchase option). It also
applies the lease of low value assets recognition exemption to leases of office equipment that are considered to be low value.
Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the
lease term.
O. Provisions
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can
be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is
virtually certain. The expense relating to a provision is presented in the income statement net of any reimbursement.
The effect of the time value of money is not material and therefore the provisions are not discounted.
No warranty provision is made for steel panel radiators based on the very low claims history. The Group sells electrical radiators
and a small volume of boilers and provision for these is made on a £ per unit sold basis, driven by historical warranty claims data.
A provision is recognised in respect of an unused vacation pay liability due to certain employees in Turkey. The provision is
calculated based on the number of unused days and the salary rates applicable.
Restructuring provisions are recognised only when the Group has a constructive obligation, which is when a detailed formal
proposal identifies the business or part of the business concerned, the location and number of employees affected, a detailed
estimate of the associated costs and an appropriate timeline, and when the employees affected have been notified of the
proposal’s main features.
Stelrad Group plc Annual Report 2023110
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
4 Summary of significant accounting policies continued
P. Pensions and other post-employment benefits
The Group has an obligation to provide lump sum termination payments to certain employees in Turkey and also in Italy;
these schemes are accounted for under IAS 19.
The cost of providing benefits under the schemes is determined using the projected unit credit method.
Remeasurements, comprising actuarial gains and losses, are recognised immediately in the balance sheet with a
corresponding debit or credit to retained earnings through other comprehensive income/(expense) in the period in which they
occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
• the date of the plan amendment or curtailment; and
• the date that the Group recognises restructuring-related costs.
Net interest is calculated by applying the discount rate to the defined benefit liability. The Group recognises the following
changes in the defined benefit obligation under “cost of sales”, “administration expenses” and “selling and distribution
expenses” in the consolidated income statement (by function):
• service costs comprising current service costs, past service costs, gains and losses on curtailments and
non-routine settlements.
For the defined contribution schemes operated by the Group, the amount charged to the income statement in respect of
pension costs and other post-retirement benefits is the contributions payable in exchange for services rendered in the period.
Differences between contributions payable in the period and contributions actually paid are shown as either accruals or
prepayments in the balance sheet.
Q. Financial reporting in hyperinflationary economies (IAS 29)
The financial statements of any subsidiary entity whose functional currency is the currency of a hyperinflationary economy are
restated for changes in the general purchasing power of that currency. The financial statements of entities whose functional
currency is the Turkish Lira have been restated from 1 January 2022 by applying a general price index. As a result, the financial
statements are stated in terms of the measuring unit current at the balance sheet date. In summary:
• non-monetary assets and liabilities (other than those that are carried at current amounts at the end of the reporting period,
such as net realisable value and fair value) are restated for the change in purchasing power caused by inflation from the date
of initial recognition to the balance sheet date;
• monetary assets and liabilities are not restated;
• all items in the statement of comprehensive income are expressed in terms of the measuring unit current at the end of
the reporting period and are therefore restated for inflation from the dates when the items of income and expenses were
initially recorded in the financial statements; and
• a gain or loss on the net monetary position is included in profit or loss for the period from 1 January 2022 to the end of the
reporting period to reflect the impact of inflation on holding monetary assets and liabilities in local currency.
The general price index used at the balance sheet date is the TUIK Index provided by the Turkish Statistical Institute.
One of the indicators of a hyperinflationary currency is cumulative inflation over a three-year period in excess of 100%. This
became the case for the Turkish Lira at 31 March 2022 and, as such, the use of inflation accounting is required in respect of
Turkish Lira functional operations for periods ending on or after 30 June 2022 using the published consumer price index.
In the process of applying IAS 29, management does not consider that it has made any judgements which would have
a significant effect on the amounts recognised in the consolidated financial statements.
The financial statements of a subsidiary entity that has the functional currency of a hyperinflationary economy are restated
in accordance with IAS 29, as outlined above, before being included in the consolidated financial statements. All amounts in
the subsidiary’s financial statements, including all items in the statement of comprehensive income (which would usually be
translated at the average exchange rate), are then translated at the closing exchange rate.
Comparative amounts presented previously in a stable currency are not restated.
Upon first application of IAS 29, the difference between the closing equity of the previous year and the opening equity of the
current year is recognised as an IAS 29 adjustment in the consolidated statement of changes in equity.
The combined effect of restating in accordance with IAS 29 and translation in accordance with IAS 21 has been presented as a
net change in other comprehensive income.
Further details on the application of IAS 29 are presented in note 30.
On 1 January 2023, the functional currency of the Turkish business was changed from Turkish Lira to Euro and, as a result, IAS 29
is no longer being applied after this date.
Annual Report 2023 Stelrad Group plc 111
4 Summary of significant accounting policies continued
R. Share-based payments (IFRS 2)
The fair value of equity-settled share options granted is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured as at the date the options are granted and the charge is only amended if vesting does not
take place due to non-market conditions not being met. Various option pricing models are used according to the terms of the
option scheme under which the options were granted. The fair value is spread over the period during which the employees
become unconditionally entitled to the options. At the balance sheet date, if it is expected that non-market conditions will
not be satisfied, the cumulative expense recognised in relation to the relevant options is reversed.
With respect to share-based payments, a deferred tax asset is recognised on the relevant tax base. The tax base is then
compared to the cumulative share-based payment expense recognised in the income statement. Deferred tax arising on
the excess of the tax base over the cumulative share-based payment expense recognised in the income statement has been
recognised directly in equity outside the SOCI as share-based payments are considered to be transactions with shareholders.
Where the Company grants options over its own shares to employees of its subsidiaries, it recognises, in its individual financial
statements, an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment
charge recognised in its consolidated financial statements, with the corresponding credit being recognised in equity.
S. Exceptional items
Exceptional items are disclosed by virtue of their nature, size or incidence to allow a better understanding of the underlying
trading performance of the Group.
T. Dividends
Final dividends are recorded in the financial statements in the period in which they are approved by the Company’s
shareholders. Interim dividends are recorded in the period in which they are approved and paid.
U. New standards applied in the year
Several amendments and interpretations apply for the first time in 2023, but do not have a material impact on the consolidated
financial statements of the Group. These include:
• IFRS 17 Insurance Contracts
• Definition of Accounting Estimates – Amendments to IAS 8
• Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendment to IAS 12
• Amendment to IAS 12 – International Tax Reform – Pillar Two Model Rules
V. New standards and interpretations not applied
The International Accounting Standards Board has issued the following standards and interpretations with an effective date
after the date of these financial statements:
International Accounting Standards (IAS/IFRSs)
Effective date
(period beginning
on or after)
Classification of Liabilities as Current or Non-current – Amendments to IAS 1 1 January 2024
Lease Liability in a Sale and Leaseback – Amendments to IFRS 16 1 January 2024
Amendment to IAS 7 and IFRS 7 – Supplier Finance 1 January 2024
Non-current Liabilities with Covenants – Amendments to IAS 1 1 January 2024
It is anticipated that adoption of these standards and interpretations will not have a material impact on the Group’s
financial statements.
The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.
5 Significant accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures,
and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Group’s accounting policies, management has made judgements which would have a
significant effect on the amounts recognised in the consolidated financial statements.
Functional currency
Following the economic crisis in Turkey in 2018 the Group has tried to limit its exposure to volatility in Turkish Lira (TL) in the
Turkish business. Over that time export growth opportunities for the Turkish business have also increased as the Group has
looked to take advantage of the lower manufacturing cost in Turkey. Both of these factors have resulted in a gradual decrease
in sales into the local Turkish market with the percentage of the Turkish business’ sales in TL over that period reducing to c.15%
of total sales in Turkey.
Stelrad Group plc Annual Report 2023112
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
5 Significant accounting judgements, estimates and assumptions continued
Judgements continued
Functional currency continued
The strategic focus for the Turkish business has evolved over that time and following the installation of two additional radiator
manufacturing lines in the Group’s Turkish factory, the Directors confirmed that a strategic change was now complete and that
the Turkish business would be operated primarily as an export company going forward. Based on this decision the Directors
recognised they needed to consider whether the functional currency for the Turkish business should be changed taking into
account IAS 21 paragraph 13 which stipulates that the functional currency should only be changed when there is a change in
the relevant underlying transactions, events and conditions.
When considering whether or not there had been a change in the underlying transactions, events and conditions the Directors
considered the increased production capabilities at the Turkish factory arising from the installation of the two additional
manufacturing lines, which are predominantly to serve the European and UK export markets, and the resultant sales to
European and UK export markets that this change has created. They considered this alongside the steady reduction in TL sales
and rise in Euro and GBP sales in recent years. In the Directors’ judgement these factors confirm that there has been a change
in the currency profile of the Turkish business which is now a permanent change and is expected to continue. As a result, the
Directors carried out a review of the functional currency of the Turkish business by reference to the primary and secondary
indicators outlined in IAS 21 The Effects of Changes in Foreign Exchange Rates. Another relevant factor that the Directors took
into consideration was the decision from 1 January 2023 to put in place Euro:USD forward contracts at the point of purchase for
all USD purchases and Euro:GBP forward contracts at the point of sale for all GBP sales made by the Turkish business.
The results of this review, which are outlined below, led the Directors to decide that it was necessary to change the functional
currency of the Turkish business from Turkish Lira to Euros from 1 January 2023.
An analysis of the functional currency of the Turkish business by reference to the key indicators outlined in IAS 21 The Effects of
Changes in Foreign Exchange Rates is outlined below:
Indicator Analysis
Sales price
The currency that mainly influences
sales prices for goods and services (this
will often be the currency in which
sales prices for goods and services are
denominated and settled).
A high proportion of sales are denominated and settled in GBP and Euro due to the
predominant sales markets being GBP (UK) and Euro (Europe) denominated. These
two currencies now make up approximately 80 – 85% of total sales for the Turkish business.
Local competition in the UK and European sales markets dictates the sales price.
Sales prices are negotiated in both GBP and Euro.
Selling prices and margins for all customers in all geographies are analysed,
benchmarked and assessed by the business in Euros.
Sales market
The currency of the country whose
competitive forces and regulations
mainly determine the sales prices of
goods and services.
The predominant sales markets are GBP (UK) and Euro (Europe) denominated.
Costs
The currency that mainly influences
labour, material and other costs of
providing goods or services (this will often
be the currency in which such costs are
denominated and settled).
Raw material purchases are denominated in USD and Euro. Selling and distribution
expenses and administrative expenses are denominated in Euro and TL.
Employee and utilities costs are denominated in TL, with management salaries
being benchmarked against Euro equivalents annually. Capital expenditure is
predominantly in Euro including one of the two recently installed additional
manufacturing lines.
Financing
The currency in which funds from
financing activities (i.e. issuing debt and
equity instruments) are generated.
Intercompany loans are denominated in Euro.
Historically, external loan arrangements, where undertaken, have been
exclusively in Euro.
Cash flows
The currency in which receipts from
operating activities are usually retained.
The majority of excess cash from operating activities is retained in Euro.
Since 1 January 2023, Euro:USD forward contracts are put in place at the point of
purchase for USD purchases made by the Turkish business, and Euro:GBP forward
contracts are put in place at the point of sale for GBP sales made by the Turkish
business. As a result, Euro is the currency that underpins the majority of cash flows.
Cash balances exists in GBP and USD intermittently following receipt of income
and in advance of supplier payments being made. A small amount of cash is
retained in TL for local funding.
Dividends from the business are made in Euro.
Annual Report 2023 Stelrad Group plc 113
5 Significant accounting judgements, estimates and assumptions continued
Judgements continued
Functional currency continued
Based on the indicators for functional currency being mixed between Euro, GBP and USD, IAS 21 requires the Directors to use
their judgement to determine the functional currency that most faithfully represents the economic effects of the underlying
transactions, events and conditions.
In the judgement of the Directors, the functional currency is Euro based on the following factors:
• the agreed strategy to operate the Turkish business primarily as an export company;
• Euro accounts for a significant proportion of both sales and costs;
• all financing is carried out in Euro;
• excess cash from operating activities is retained in Euro, with the use of Euro:USD forward contracts for USD purchases and
Euro:GBP forward contracts for GBP sales. As a result, Euro is the currency that underpins the majority of cash flows;
• the increase in production capabilities in the second half of 2022 was carried out to accommodate higher Euro sales; and
• the Turkish business has historically prepared its Group level reporting information in Euro.
The Directors recognise that determining whether or not there has been a change in the relevant underlying transactions,
events and conditions in relation to the Turkish business and the functional currency of the Turkish business are critical judgements.
Business combinations
In July 2022, the Group acquired Radiators SpA, an Italian manufacturer of heat emitters, for €28.3 million.
As a result, an exercise was undertaken to measure the fair value of assets and liabilities acquired as part of the business
combination. This included ascertaining a fair value for all inventory acquired as part of the business combination. Management
exercised judgement in determining whether any additional intangible assets, such as customer relationships, should be
identified and the valuation assigned to these. Management engaged with experts in order to assist with the valuation of
certain tangible and intangible assets, including customer relationships. The opening acquisition balance sheet was finalised
in the period with the changes from the initial assessment outlined in note 19.
Impairment of non-financial assets
Intangible assets, including goodwill, that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or circumstances
indicate that the carrying amount may not be recoverable. Details of the impairment assessment of goodwill are disclosed
in note 18.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, which have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future developments, however, may change due
to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions
when they occur.
Rebates
A proportion of rebates is paid to the end consumers of goods sold. Uncertainties exist over the value of the rebates recognised
as, until claims are made by end consumers, the Group cannot be certain which consumers have purchased which products.
Due to this uncertainty it is therefore judgemental what contractual rates, if any, will apply to goods sold.
Significant management judgement is required in order to assess the level of rebate required at the balance sheet
date. Management is able to utilise market information and historical/current data and trends in order to make an
appropriate estimate.
A reasonably possible change in the estimates surrounding rebates would not result in a material impact to the financial statements.
Stelrad Group plc Annual Report 2023114
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
6 Segmental information
IFRS 8 Operating Segments requires operating segments to be determined from the Group’s internal reporting to the
Chief Operating Decision Maker (“CODM”). The CODM has been determined to be the Chief Executive Officer and Chief
Financial Officer, who receive information on the Group’s revenue channels in key geographical regions based on the Group’s
management and internal reporting structure. The CODM assesses the performance of geographical segments based on a
measure of revenue and adjusted operating profit.
Adjusted operating profit is earnings before interest, tax, amortisation of customer relationships, exceptional items, the impact
of IAS 29 (until 31 December 2022) and foreign exchange differences (until 31 December 2022).
IAS 29 was applied in the year ended 31 December 2022. The impact of IAS 29 has been removed in arriving at adjusted
operating profit, as management believes that the pre-IAS 29 results give a more meaningful presentation of the Group’s
underlying performance.
On 1 January 2023, the functional currency of the Turkish business was changed from Turkish Lira to Euro and, as a result, IAS 29
is no longer being applied after this date. Also, after this date, the impact of foreign exchange differences is no longer adjusted
for in arriving at adjusted operating profit.
Revenue by geographical market
2023
£’000
2022
£’000
UK & Ireland 139,422 140,066
Europe 149,063 149,673
Turkey & International 19,708 26,576
Total revenue 308,193 316,315
The revenue arising in the UK, being the Company’s country of domicile, was £133,323,000 (2022: £133,458,000).
Adjusted operating profit by geographical market
2023
£’000
2022
£’000
UK & Ireland 24,485 22,716
Europe 9,061 13,877
Turkey & International 1,348 2,055
Central costs (5,606) (4,668)
Adjusted operating profit 29,288 33,980
Exceptional items (2,466) (1,809)
Amortisation of customer relationships (141) (57)
Foreign exchange differences — (3,446)
Impact of IAS 29 — (6,040)
Operating profit 26,681 22,628
In the year ended 31 December 2023 the exceptional items relate to a £2,908,000 restructuring exercise undertaken in quarter
four of the year in order to drive cost savings for future periods, partially offset by exceptional income related to the acquisition
of Radiators SpA of £442,000.
In the year ended 31 December 2022 the exceptional items within administrative expenses of £755,000 relate to redundancy
costs and acquisition costs, and the exceptional item within cost of sales of £1,054,000 relates to the reversal of the IFRS 3 fair
value uplift on finished goods and work in progress.
All exceptional items have been presented as such because they are one-off in nature and separate disclosure allows the
underlying trading performance of the Group to be better understood.
The revenue information above is based on the locations of the customers. All revenue arises from the sale of goods.
No customer has revenues in excess of 10% of revenue (2022: none).
Annual Report 2023 Stelrad Group plc 115
6 Segmental information continued
Non-current operating assets
2023
£’000
2022
£’000
UK 17,547 18,823
The Netherlands 20,581 22,757
Turkey 26,500 26,854
Italy 26,818 25,786
Other 1,052 1,239
Total 92,498 95,459
7 Other operating income/(expenses)
2023
£’000
2022
£’000
Net (loss)/gain on disposal of property, plant and equipment (11) 220
Foreign currency gains/(losses) 1,736 (3,446)
Net losses on forward derivative contracts (689) —
Sundry other expenses – environmental claim (104) —
Sundry other income 267 153
1,199 (3,073)
8 Operating profit
Operating profit is stated after charging/(crediting):
2023
£’000
2022
£’000
Auditors’ remuneration:
– Audit of the Company and consolidated financial statements 155 133
– Audit of subsidiaries 275 265
430 398
– Non-audit services – interim review fee 36 35
– Non-audit services – other 8 7
44 42
Total auditors’ remuneration 474 440
Depreciation of owned assets 9,085 7,672
Depreciation of right-of-use assets 2,530 2,028
11,615 9,700
Amortisation of customer relationships 141 57
Amortisation of other intangibles 316 106
457 163
Loss/(profit) on sale of property, plant and equipment 11 (220)
Other exchange (gains)/losses (1,047) 3,446
Research and development costs 1,591 1,083
Stelrad Group plc Annual Report 2023116
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
9 Employee benefits expense
2023
£’000
2022
£’000
Wages and salaries 42,232 34,546
Social security costs 7,327 5,397
Other pension costs 3,349 2,732
Share-based payment charge (note 11) 515 250
53,423 42,925
The average monthly number of employees during the year was made up as follows:
2023
Number
2022
Number
Cost of sales 788 788
Selling and distribution 560 571
Administration 131 124
1,479 1,483
10 Directors’ remuneration
The Remuneration Policy is described in the Remuneration Report on pages 74 to 87.
2023
£’000
2022
£’000
Aggregate remuneration 1,715 1,289
The amounts in respect of the highest paid Director are as follows:
2023
£’000
2022
£’000
Aggregate remuneration 832 569
Aggregate remuneration is inclusive of basic salary, annual bonus (including any accrued bonuses), pension contributions and
other taxable benefits. No retirement benefits are accruing to Directors under a defined contribution scheme or a defined benefit
scheme (2022: £nil). Further details on Directors’ remuneration can be found in the Remuneration Report on pages 74 to 87.
11 Share-based payments
Long Term Incentive Plans
The Executive Directors and selected members of the senior management team across the Group participate in the Stelrad
Group plc Long Term Incentive Plan (“LTIP”), which was set up and launched during the year ended 31 December 2022. The
LTIP provides for the Executive Directors and selected members of the senior management team to be awarded nil-cost shares
in the Group, conditional on specified performance conditions being met over a period of three years. The LTIP is based on the
achievement of two performance conditions, and the awards granted are split equally between the two conditions – adjusted
EPS (a non-market condition) and relative TSR as compared to the selected benchmark index (a market condition). Refer to the
Remuneration Report on pages 74 to 87 for further details of the LTIP.
The expense recognised for the LTIP during the year ended 31 December 2023 was £406,000 (2022: £250,000).
The fair value of LTIP awards granted (based on market conditions) is estimated as at the date of grant using a Monte Carlo
model, taking into account the terms and conditions upon which the awards were granted. The inputs to the model used for
the awards granted in the year ended 31 December 2022 were:
2022
Stelrad Group plc:
Share price at date of grant £2.15
Dividend yield 0.0%
Risk-free rate 1.6%
Future share price volatility 25.0%
Selected comparator group:
Future share price volatility 47.9 %
Correlation between companies 1.0%
Annual Report 2023 Stelrad Group plc 117
11 Share-based payments continued
Long Term Incentive Plans continued
The fair value of the LTIP awards granted (based on non-market conditions) is equal to the share price at the date of grant.
The following table shows the number of share awards for the LTIP:
2023 2022
Outstanding at the beginning of the year 985,729 —
Granted during the year — 1,011,180
Forfeited during the year — (25,451)
Exercised during the year — —
Outstanding at the end of the year 985,729 985,729
The weighted average share price of the share awards at the year end was £1.31 (2022: £1.25).
There were no awards granted during the year ended 31 December 2023. The weighted average fair value of awards granted
during the year ended 31 December 2022 was £1.75.
The weighted average remaining contractual life of the awards was 1.39 years (2022: 2.39 years).
There were no awards exercised in the year (2022: nil).
Deferred Share Bonus Plan
The Deferred Share Bonus Plan (“DSBP”) provides for the Executive Directors of the Group to be awarded shares in the Group
conditional on the achievement of financial and strategic targets. The shares are deferred over a two-year period. The DSBP
awards are not subject to any market-based conditions. Therefore, the fair value of the awards is equal to the share price at the
date of grant. Refer to the Remuneration Report on pages 74 to 87 for further details of the DSBP.
The expense recognised for the DSBP during the year ended 31 December 2023 was £109,000 (2022: £nil).
No share awards have been granted under the DSBP during the year ended 31 December 2023 (2022: nil).
12 Finance income
2023
£’000
2022
£’000
Interest on cash deposits 182 50
13 Finance costs
2023
£’000
2022
£’000
Interest on bank loans 5,663 2,564
Amortisation of loan issue costs 513 492
Interest expense on defined benefit liabilities 357 481
Finance charges payable on lease liabilities 120 124
Other finance charges 1,028 912
7,681 4,573
14 Income tax expense
The major components of income tax expense are as follows:
2023
£’000
2022
£’000
Consolidated income statement
Current income tax:
Current income tax charge 7,214 4,090
Adjustments in respect of current income tax charge of previous year 10 (290)
Deferred tax:
Relating to origination and reversal of temporary differences (3,466) 2,802
Relating to change in tax rates — (666)
Income tax expense reported in the income statement 3,758 5,936
Stelrad Group plc Annual Report 2023118
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
14 Income tax expense continued
2023
£’000
2022
£’000
Consolidated statement of comprehensive income
Tax related to items recognised in other comprehensive income/(expense) during the year:
Deferred tax on actuarial loss (206) (423)
Current tax on monetary items forming part of net investment and on hedges of
net investment 158 631
Income tax (credited)/expensed to other comprehensive income (48) 208
Reconciliation of tax expense and the accounting profit at the tax rate in the United Kingdom of 23.5% (2022: 19%):
2023
£’000
2022
£’000
Profit before tax 19,182 10,245
Profit before tax multiplied by standard rate of corporation tax in the UK of 23.5% (2022: 19%) 4,508 1,947
Adjustments in respect of current income tax charge of previous year 10 (290)
Non-deductible expenses 60 147
Adjustments due to IAS 29 – non-tax deductible expenses — 4,779
Differences arising due to tax losses 1,205 (321)
Other timing differences (including 2023 inflation adjustment to Turkish tax assets) (3,163) (161)
Benefit of overseas investment incentives (263) (1,042)
Withholding tax on dividend income 1,760 527
Effect of changes in overseas tax rates — (127)
Effect of different overseas tax rates (359) 1,016
Effect of changes in UK deferred tax rate — (539)
Total tax expense reported in the income statement 3,758 5,936
Deferred tax
Deferred tax relates to the following:
Consolidated balance sheet
Consolidated income statement
2023
£’000
2022
£’000
2023
£’000
2022
£’000
Capital allowances 279 204 (538) (730)
Pension 719 806 (275) 10
Fixed asset fair value adjustments (1,421) (1,711) 252 116
Losses available for offsetting against future income 4,387 5,471 (1,039) 572
Other temporary differences 2,503 (1,984) 5,066 (2,104)
Deferred tax credit/(charge) 3,466 (2,136)
Net deferred tax assets 6,467 2,786
Reflected in the balance sheet as:
Deferred tax assets 6,685 5,397
Deferred tax liabilities (218) (2,611)
Deferred tax assets, net 6,467 2,786
Annual Report 2023 Stelrad Group plc 119
14 Income tax expense continued
Reconciliation of deferred tax assets, net
2023
£’000
2022
£’000
Opening balance as at 1 January 2,786 6,158
On business combination — 315
IAS 29 opening balance sheet adjustment — (2,284)
Tax income/(charge) recognised in income statement 3,466 (2,136)
Tax income recognised in other comprehensive income/(expense) 206 423
Exchange adjustment 9 310
Closing balance as at 31 December 6,467 2,786
The Group offsets tax assets and liabilities if it has a legally enforceable right to set them off and they are levied by the same tax
authority. Deferred tax assets in respect of losses of £2,130,000 (2022: £1,821,000) have been recognised in respect of two (2022:
two) loss making subsidiary companies; these are recognised on the grounds of future projected performance.
Deferred tax asset recognition
During the years ended 31 December 2022 and 31 December 2023, the Group chose to derecognise certain tax losses, in
particular those arising from Corporate Interest Restriction (“CIR”) rules. An increase in debt to finance the acquisition of
Radiators SpA and an increase in interest rates mean that these tax losses will take longer to utilise and therefore an element
has been derecognised.
The deferred tax assets have been analysed in detail at the year end and the recognition of assets, in particular those in respect
of tax losses, has been scrutinised in detail with modelling undertaken to ensure that they are likely to be utilised over a period
of time where profitability can be estimated with reasonable certainty.
Unrecognised deferred tax balances
2023
£’000
2022
£’000
Capital allowances 20 17
Losses available for offsetting against future income 3,733 2,810
3,753 2,827
The Group has tax losses which arose in the United Kingdom of £14,932,000 (2022: £11,240,000) that are available indefinitely
for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been
recognised in respect of these losses as they either relate to CIR losses which cannot be reliably utilised in the short term or
they arose prior to April 2017 in subsidiaries that are not profit making and where there is no evidence of recoverability in the
near future.
Changes in the corporate income tax rate
The UK corporation tax rate rose to 25% from 1 April 2023.
15 Earnings per share
2023
£’000
2022
£’000
Net profit for the year attributable to owners of the parent 15,424 4,309
Exceptional items 2,466 1,809
Amortisation of customer relationships 141 57
Foreign exchange differences — 3,446
Impact of IAS 29 — 13,906
Tax on exceptional items (651) (462)
Tax on foreign exchange differences — (656)
Tax on amortisation of customer relationships (39) (16)
Tax on IAS 29 — 1,940
Adjusted net profit for the year attributable to owners of the parent 17,341 24,333
IAS 29 was applied in the year ended 31 December 2022. The impact of IAS 29 has been removed in arriving at adjusted
net profit, as management believes that the pre-IAS 29 results give a more meaningful presentation of the Group’s
underlying performance.
Stelrad Group plc Annual Report 2023120
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
15 Earnings per share continued
On 1 January 2023, the functional currency of the Turkish business was changed from Turkish Lira to Euro and, as a result, IAS 29
is no longer being applied after this date. Also, after this date, the impact of foreign exchange differences is no longer adjusted
for in arriving at adjusted net profit.
2023
Number
2022
Number
Basic weighted average number of shares in issue 127,352,555 127,352,555
Diluted weighted average number of shares in issue 127,352,555 127,352,555
Earnings per share
Basic earnings per share (pence per share) 12.11 3.38
Diluted earnings per share (pence per share) 12.11 3.38
Adjusted earnings per share
Basic earnings per share (pence per share) 13.62 19.11
Diluted earnings per share (pence per share) 13.62 19.11
16 Dividends paid
The Board is recommending a final dividend of 4.72 pence per share (2022: 4.72 pence per share), which, if approved, will mean
a final dividend payment of £6,011,000 (2022: £6,011,000).
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included
as a liability in these consolidated financial statements.
2023
£’000
2022
£’000
Declared and paid during the year
Equity dividend on ordinary shares:
Final dividend for 2022: 4.72p per share (2021: 0.96p per share) 6,011 1,223
Interim dividend for 2023: 2.92p per share (2022: 2.92p per share) 3,718 3,718
9,729 4,941
2023
£’000
2022
£’000
Dividend proposed (not recognised as a liability)
Equity dividend on ordinary shares:
Final dividend for 2023: 4. 72p per share (2022: 4. 72p per share) 6 , 0 11 6 , 01 1
Annual Report 2023 Stelrad Group plc 121
17 Property, plant and equipment
Freehold land
and buildings
£’000
Leasehold
buildings
£’000
Assets under
construction
£’000
Plant and
equipment
£’000
Fixtures, fittings
and motor
vehicles
£’000
Total
£’000
Cost
At 31 December 2021 21,828 11,019 4,768 47,906 6,919 92,440
IAS 29 opening adjustment 7,282 — 31 14,517 1,005 22,835
At 1 January 2022 29,110 11,019 4,799 62,423 7,924 115,275
On business combination 10,608 127 974 4,321 1,498 17,528
Additions 228 427 7,773 1,577 1,276 11,281
Transfers 1,820 — (6,183) 4,068 295 —
Disposals — — — (94) (488) (582)
IAS 29 adjustment 5,528 — — 13,853 922 20,303
Exchange adjustment (821) 649 (94) (2,760) (193) (3,219)
At 31 December 2022 46,473 12,222 7, 269 83,388 11,234 160,586
Additions 233 1,100 3,616 2,833 1,483 9,265
Transfers 406 — (9,539) 8,434 699 —
Disposals (88) (292) — (3,779) (1,006) (5,165)
Exchange adjustment (822) (289) (80) (1,798) (130) (3,119)
At 31 December 2023 46,202 12,741 1,266 89,078 12,280 161,567
Accumulated depreciation
and impairment
At 31 December 2021 9,302 3,123 — 21,316 5,005 38,746
IAS 29 opening adjustment 1,845 — — 10,748 847 13,440
At 1 January 2022 11,147 3,123 — 32,064 5,852 52,186
Depreciation charge 1,289 1,330 — 5,785 1,296 9,700
Transfers — — — (101) 101 —
Disposals — — — (87) (457) (544)
IAS 29 adjustment 1,180 — — 7, 502 575 9,257
Exchange adjustment (241) 230 — (1,399) (207) (1,617)
At 31 December 2022 13,375 4,683 — 43,764 7,160 68,982
Depreciation charge 1,634 1,482 — 6,676 1,823 11,615
Disposals (88) (292) — (3,577) (877) (4,834)
Exchange adjustment (172) (113) — (1,097) (61) (1,443)
At 31 December 2023 14,749 5,760 — 45,766 8,045 74,320
Net book value
At 31 December 2023 31,453 6,981 1,266 43,312 4,235 87,247
At 31 December 2022 33,098 7, 539 7,269 39,624 4,074 91,604
At 31 December 2021 12,526 7, 896 4,768 26,590 1,914 53,694
The carrying value of right-of-use assets within property, plant and equipment, by line item, at the year end is:
2023
£’000
2022
£’000
Leasehold buildings 6,927 7,466
Plant and equipment 1,255 896
Fixtures, fittings and motor vehicles 1,700 1,672
9,882 10,034
Stelrad Group plc Annual Report 2023122
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
17 Property, plant and equipment continued
Right-of-use asset additions within property, plant and equipment, by line item, during the year are:
2023
£’000
2022
£’000
Leasehold buildings 1,090 418
Plant and equipment 731 153
Fixtures, fittings and motor vehicles 858 1,039
2,679 1,610
Depreciation of right-of-use assets within property, plant and equipment, by line item, during the year is:
2023
£’000
2022
£’000
Leasehold buildings 1,456 1,307
Plant and equipment 374 282
Fixtures, fittings and motor vehicles 700 439
2,530 2,028
Land and buildings with a carrying amount of £20,022,000 (2022: £21,547,000) are subject to a first charge to secure the Group’s
bank loan.
No borrowing costs have been capitalised since the assets have not met the criteria for qualifying assets.
18 Intangible assets
Goodwill
£’000
Customer
relationships
£’000
Technology
and software
costs
£’000
Total
£’000
Cost
At 1 January 2023 1,294 1,865 865 4,024
Final fair value adjustment on business combination 1,481 — — 1,481
Additions — — 507 507
Disposals — — (32) (32)
Exchange adjustment (43) (43) (21) (107)
At 31 December 2023 2,732 1,822 1,319 5,873
Accumulated amortisation and impairment
At 1 January 2023 — 59 110 169
Depreciation charge — 141 316 457
Disposals — — — —
Exchange adjustment — (1) (3) (4)
At 31 December 2023 — 199 423 622
Net book value
At 31 December 2023 2,732 1,623 896 5,251
At 31 December 2022 1,294 1,806 755 3,855
Included in technology and software costs are assets under construction of £126,000 (2022: £345,000), which are not amortised.
The remaining amortisation period of the customer relationships, being those acquired upon the acquisition of Radiators SpA,
is eleven years and seven months.
Impairment assessment of goodwill
Goodwill is not amortised but is subject to annual impairment testing. All of the goodwill recognised is allocated to a single
cash-generating unit (“CGU”), being the Radiators SpA division. A CGU represents the lowest level in the Group at which
goodwill is monitored for internal management purposes.
Impairment tests on the carrying amounts of goodwill are performed by analysing the carrying amount allocated to each CGU
against its value in use. Value in use is calculated for each CGU as the net present value of that CGU’s discounted future pre-tax
cash flows covering a three-year period. These pre-tax cash flows are based on budgeted cash flows information for a period of
three years.
Annual Report 2023 Stelrad Group plc 123
18 Intangible assets continued
Impairment assessment of goodwill continued
Terminal growth rates of 2% have been applied beyond this, based on historical macroeconomic performance and projections
of the sector served by the CGUs.
When assessing for impairment of goodwill, management has considered the impact of climate change, particularly in the
context of the risks and opportunities identified within the Task Force on Climate-related Financial Disclosures Report on
pages 36 to 39 of the Strategic Report, and has not identified any material short-term impacts from climate change that would
impact the carrying value of goodwill. Over the longer term, the risks and opportunities are more uncertain, and management
will continue to assess the quantitative impact of risks at each balance sheet date.
A pre-tax discount rate of 15.32% has been applied in determining the recoverable amounts of CGUs. The pre-tax discount rate
is estimated based on the Group’s risk adjusted cost of capital. Another key assumption is EBITDA, which is included in the
terminal value at a margin of 7.7%.
The Group has applied sensitivities to assess whether any reasonably possible changes in assumptions could cause an
impairment that would be material to these consolidated financial statements. Details of the sensitivity analysis are disclosed
in relation to Radiators SpA because it is sensitive to changes in assumptions. The base case scenario for Radiators SpA has
headroom of £1.9 million. A change in EBITDA margin of 0.5% percentage points, holding all other assumptions constant,
would erode the headroom to zero for Radiators SpA. A change in discount rate of 0.75%, holding all other assumptions
constant, would erode the headroom to zero for Radiators SpA. A reasonably possible change to the EBITDA margin of 1.0%
would give rise to an impairment of £1.6 million.
19 Business combinations
On 13 July 2022, Stelrad Radiator Holdings Limited, a wholly owned subsidiary of the Group, acquired 100% of Radiators SpA,
a radiator manufacturer incorporated in Italy. The total consideration paid was €28,346,000.
The fair value of the net assets acquired was as follows:
Book value
£’000
Provisional fair
value
adjustments
£’000
Fair value at
31 December
2022
£’000
Final
fair value
adjustments
£’000
Fair value at
31 December
2023
£’000
Intangible assets 713 1,761 2,474 — 2,474
Property, plant and equipment 11,054 6,474 17,528 — 17,528
Inventory 24,499 1,034 25,533 (398) 25,135
Trade and other receivables 17,837 — 17,837 (952) 16,885
Trade and other payables (28,403) — (28,403) — (28,403)
Deferred taxation 1,853 (1,538) 315 — 315
Current taxation (49) — (49) — (49)
Cash and cash equivalents 3,490 — 3,490 — 3,490
Provisions (3,580) — (3,580) (131) (3,711)
Pension liabilities (1,033) — (1,033) — (1,033)
Loans and other borrowings (11,360) — (11,360) — (11,360)
Total identifiable net assets 15,021 7,731 22,752 (1,481) 21,271
Goodwill on the business combination 1,222 2,703
Discharged by:
Cash consideration 23,974 23,974
During the year ended 31 December 2023, the provisional fair values of the identifiable net assets were revisited with the
fair value reduced by £1,481,000 which increased the goodwill value to £2,703,000. Goodwill of £2,703,000 reflects certain
intangibles that cannot be individually separated and reliably measured due to their nature. These items include the value
of expected synergies arising from the business combination and the experience and skill of the acquired workforce. The fair
value of the customer relationships was identified and included in intangible assets.
The gross amount of trade and other receivables is £18,681,000 in both the provisional and final fair values. All of the trade and
other receivables are expected to be collected in full, other than those that have been provided for.
Transaction costs relating to professional fees associated with the business combination in the year ended 31 December 2023
were £81,000 (2022: £251,000) and have been expensed.
During the year ended 31 December 2022, Radiators SpA generated revenue of £31,541,000 and a loss of £405,000 (adjusted
profit of £485,000) in the period from acquisition to 31 December 2022 which are included in the consolidated statement of
comprehensive income for this reporting period. If the combination had taken place at 1 January 2022, the Group’s revenue
would have been £40,588,000 higher and the profit for the year from continuing operations would have been £1,296,000 lower
than reported.
Stelrad Group plc Annual Report 2023124
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
20 Financial liabilities
Financial liabilities – other – not interest bearing
Financial instruments through profit or loss reflect the positive change in fair value of those foreign exchange forward contracts
that are not designated in hedge relationships, but are, nevertheless, intended to reduce the level of foreign currency risk for
expected sales and purchases.
Liabilities
2023
£’000
2022
£’000
Financial instruments at fair value through profit or loss
Derivatives not designated as hedges – foreign exchange forward contracts 318 —
Total instruments at fair value through profit or loss 318 —
Current 318 —
Non-current — —
Financial liabilities – interest bearing loans and borrowings
Effective
interest rate
% Maturity
2023
£’000
2022
£’000
Current interest-bearing loans and borrowings
Lease liabilities 2,469 1,520
2,469 1,520
Non-current interest-bearing loans and
borrowings
Lease liabilities 7,402 8,516
Revolving credit facility – GBP SONIA + 2.25% 9 Nov 2026 46,900 55,250
Revolving credit facility – Euro Euribor + 2.25% 9 Nov 2026 10,399 10,647
Term loan Euribor + 2.25% 9 Nov 2026 24,563 25,150
Unamortised loan costs (1,037) (1,050)
88,227 98,513
Total interest-bearing loans and borrowings 90,696 100,033
On 10 November 2021, the Group refinanced its external debt as part of the IPO and entered into an £80 million revolving
credit facility (“RCF”) jointly financed by National Westminster Bank plc and Barclays Bank PLC, which was first drawn on
10 November 2021.
On 8 July 2022, the £80 million revolving credit facility was increased by £20 million by means of an accordion option. The
facility consists of a £76.027 million revolving credit facility and a €28.346 million term loan facility.
During the year ended 31 December 2023, the £76.027 million revolving credit facility and the €28.346 million term loan
facility were extended by two years to 9 November 2026 by exercising the two-year extension option included in the facility
agreement.
The RCF and term loan facilities are secured on the assets of certain subsidiaries within the Group.
Changes in liabilities arising from financing activities
1 January
2023
£’000
Cash flows
£’000
Non-cash
changes
£’000
31 December
2023
£’000
Revolving credit facility – GBP 55,250 (8,350) — 46,900
Revolving credit facility – Euro 10,647 — (248) 10,399
Term loan 25,150 — (587) 24,563
Lease liabilities 10,036 (2,619) 2,454 9,871
Cash and cash equivalents (22,641) 794 405 (21,442)
Net liabilities arising from financing activities 78,442 (10,175) 2,024 70,291
Annual Report 2023 Stelrad Group plc 125
21 Inventories
2023
£’000
2022
£’000
Raw materials – cost 21,723 32,111
Work in progress – cost 3,327 3,530
Finished goods – lower of cost and net realisable value 34,509 38,974
Other consumables 3,817 3,236
63,376 7 7,851
The cost of inventories recognised as an expense in the year was £221,343,000 (2022: £236,248,000). The provision for the
impairment of stocks increased in the year, giving rise to a cost of £355,000 (2022: cost of £138,000). At 31 December 2023, the
provision for the impairment of stocks was £3,347,000 (2022: £2,640,000).
22 Trade and other receivables
2023
£’000
2022
£’000
Current
Trade receivables 47,619 55,739
Other receivables 2,462 4,197
Prepayments 593 561
50,674 60,497
Non-current
Other receivables 301 317
301 317
The table below sets out the movements in the allowance for expected credit losses of trade receivables:
2023
£’000
2022
£’000
At 1 January 763 204
On business combination — 844
Charge for the year 155 —
Utilised — (223)
Unused amounts reversed (95) (122)
Exchange adjustment (17) 60
At 31 December 806 763
As at 31 December, the details of the provision matrix used to calculate provisions for trade receivables (with the ageing gross of
impairment) are as follows:
Total
£’000
Current
£’000
<30 days
£’000
30–90 days
£’000
>90 days
£’000
2023
Gross carrying amount 48,425 41,635 4,600 777 1,413
Expected credit loss rate (%) 2 — 1 16 45
Expected credit loss 806 — 46 125 635
2022
Gross carrying amount 56,502 49,403 3,217 3,056 826
Expected credit loss rate (%) 1 — 1 3 77
Expected credit loss 763 — 32 92 639
Stelrad Group plc Annual Report 2023126
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
23 Cash and cash equivalents
2023
£’000
2022
£’000
Cash at bank and on hand 21,442 22,641
24 Trade and other payables
2023
£’000
2022
£’000
Current
Trade payables 49,263 73,903
Other payables and accruals 22,319 18,860
Other taxes and social security 5,685 6,045
Interest payable 789 406
78,056 99,214
25 Provisions
Warranty
£’000
Compensation
fund
£’000
Restructuring
£’000
Unused
vacation
£’000
Total
£’000
At 1 January 2022 35 — — 302 337
On business combination
587 1,125 1,868 — 3,580
Arising during the year 218 12 — 537 767
Utilised (274) (5) (1,184) (557) (2,020)
Unused amounts reversed — — (27) (16) (43)
Exchange adjustment 27 67 62 (58) 98
At 31 December 2022 593 1,199 719 208 2,719
On business combination — — 131 — 131
Arising during the year 864 50 2,652 728 4,294
Utilised (696) — (799) (506) (2,001)
Exchange adjustment (15) (29) (19) (83) (146)
At 31 December 2023 746 1,220 2,684 347 4,997
Current 194 — 2,684 139 3,017
Non-current 552 1,220 — 208 1,980
Compensation fund
The supplementary customer compensation fund is made in accordance with European legislation to provide for potential
severance payments to agents.
Restructuring
Restructuring provisions at 31 December 2023 relate to a Group-wide restructuring programme undertaken to drive cost
savings for future periods.
Restructuring provisions at 31 December 2022 related to the remaining costs still to be settled in respect of the closure of a
manufacturing site in Italy. The site was closed prior to the acquisition of Radiators SpA and the costs were provided for at the
point of acquisition.
Unused vacation
A provision is recognised in respect of an unused vacation pay liability due to certain employees in Turkey. The timing of the
provision is dependent on the rate at which employees take additional vacation.
Annual Report 2023 Stelrad Group plc 127
26 Share capital and reserves
2023
Number
2023
£
2022
Number
2022
£
Authorised, called up and fully paid
Ordinary shares of £0.001 each 127,352,555 127,353 127,352,555 127,353
127,353 127, 353
On 25 January 2022, a capital reduction application was approved by the courts, reducing the value of ordinary shares in issue
from £1 to £0.001. Under the same application the courts approved the reduction of the Company’s share premium account in
full. The reduction of share capital and share premium was transferred to retained earnings.
27 Commitments and contingencies
Commitments
Amounts contracted for but not provided in the financial statements amounted to £215,000 (2022: £433,000) for the Group. All
amounts relate to property, plant and equipment.
Contingent liabilities
Termo Teknik Ticaret ve Sanayi A.S. has issued letters of guarantee and letters of credit to its steel suppliers amounting to
$18,309,000 (2022: $22,685,000) and $10,204,000 (2022: $11,175,000) respectively. Termo Teknik Ticaret ve Sanayi A.S. has also
issued letters of guarantee denominated in Turkish Lira totalling TL14,876,000 (2022: TL13,220,000).
The Group enters into various forward currency contracts to manage the risk of foreign currency exposures on certain
purchases and sales. The total amount of unsettled forward contracts as at 31 December 2023 is £12,197,000 (2022: £nil) on
purchases and £20,750,000 (2022: £nil) on sales.
The fair value of the unsettled forward contracts held at the balance sheet date, determined by reference to their market
values, is a liability of £318,000 (2022: £nil).
As part of the £100 million loan facility, entered into in November 2021, and amended on 8 July 2022, the Group is party to a
cross-collateral agreement secured on specific assets of certain Group companies. No liability is expected to arise from the
agreement.
Under an unlimited multilateral guarantee, the Company, in common with certain fellow subsidiary undertakings in the UK,
has jointly and severally guaranteed the obligations falling due under the Company’s net overdraft facilities. No liability is
expected to arise from this arrangement.
28 Pensions and other post-employment plans
2023
£’000
2022
£’000
Net employee defined benefit liability
Turkish scheme – IAS 19 3,148 3,546
Italian scheme – IAS 19 860 944
Other retirement obligations – non-IAS 19 45 52
4,053 4,542
Turkish scheme
In Turkey there is an obligation to provide lump sum termination payments to certain employees; this represents 30 days’ pay
(subject to a cap imposed by the Turkish Government) for each year of service. The IAS 19 valuation gives a liability of £3,148,000
(2022: £3,546,000). There are no assets held in this plan (2022: £nil). The expected contributions to the plan for the next
reporting period to cover benefits paid are £269,000. The service cost in the year was £372,000 (2022: £269,000).
Italian scheme
The Italian pension scheme, the Trattamento di Fine Rapporto, is a deferred compensation scheme established by Italian law.
Employers are required to provide a benefit to employees when, for any reason, their employment is terminated. The IAS 19
valuation gives a net liability of £860,000 (2022: £944,000). The expected contributions to the plan for the next reporting period
to cover benefits paid are £71,000. The service cost in the year was £nil (2022: £nil).
UK scheme
The UK has one defined contribution pension scheme, following the transfer of all pension arrangements to a Master
Trust in 2020.
The total employer contributions made in the year were £1,222,000 (2022: £1,077,000). There were outstanding contributions
totalling £nil (2022: £nil) due to the scheme at the balance sheet date.
Stelrad Group plc Annual Report 2023128
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
28 Pensions and other post-employment plans continued
Other overseas retirement obligations
The Group operates a number of defined contribution pension schemes in its overseas entities and also has certain
other retirement obligations. The contributions to overseas pension schemes in the year and any movements in the provision
for other retirement obligations are reported as part of the employee benefits note and total £1,755,000 (2022: £1,369,000).
IAS 19 accounting – Turkish and Italian schemes
Movement in defined benefit obligation
Italian
scheme
2023
£’000
Turkish
scheme
2023
£’000
Italian
scheme
2022
£’000
Turkish
scheme
2022
£’000
At 1 January 944 3,546 — 1,655
On acquisition — — 1,033 —
Current service cost — 329 — 216
Interest cost 33 291 9 377
Plan curtailments – service cost — 43 — 53
Plan curtailments – interest cost — 33 — 95
Amounts recognised in income statement 33 696 9 741
Actuarial losses/(gains) 11 925 (118) 2,050
Benefits paid (107) (473) (39) (548)
Exchange differences (21) (1,546) 59 (352)
At 31 December 860 3,148 944 3,546
Amounts recognised in other comprehensive income/(expense)
Italian
scheme
2023
£’000
Turkish
scheme
2023
£’000
Italian
scheme
2022
£’000
Turkish
scheme
2022
£’000
Experience adjustments – obligation 6 (1,055) (72) (969)
Changes in demographic assumptions – obligation — (93) — (197)
Changes in financial assumptions – obligation (17) 223 190 (884)
At 31 December (11) (925) 118 (2,050)
Principal actuarial assumptions
Italian
scheme
2023
Turkish
scheme
2023
Italian
scheme
2022
Turkish
scheme
2022
Discount rate (per annum) 3.2% 25.0% 3.7% 10.6%
Future salary increases (per annum) n/a 22.0% n/a 10.1%
Quantitative sensitivity analysis
2023
Discount rate
(per annum)
2023
Future salary increases
(per annum)
+1%
£’000
-1%
£’000
+1%
£’000
-1%
£’000
(Decrease)/increase in defined benefit obligation – Italian scheme (63) 68 — —
(Decrease)/increase in defined benefit obligation – Turkish scheme (139) 164 160 (139)
The sensitivity analysis above has been determined based on a method that extrapolates the impact on the net defined benefit
obligation as a result of reasonable changes in key assumptions at the end of the reporting year.
Annual Report 2023 Stelrad Group plc 129
29 Related party disclosures
The Group does not consider that it has an ultimate controlling party. The Bregal Fund III LP does not have control of the Group
because its share of the Group is less than 50% and it does not have the power to affect its returns from the Group.
During the year, the Group spent £3,000 (2022: £6,000) on purchases from Polypal Netherlands BV (whose ultimate controlling
party is The Bregal Fund III LP); the balance outstanding at the year end was £nil (2022: £nil). During the year, the Group made
purchases of £3,742,000 (2022: £4,189,000) from AMG Fabrications (NE) Limited (whose ultimate controlling party is a close
member of key management personnel’s family); the balance outstanding at the year end was £447,000 (2022: £378,000).
The key management personnel are considered to be the Executive Directors and Non-Executive Directors of the Group.
The following table highlights the remuneration that is recorded in the income statement in respect of these personnel,
including Company social security costs:
2023
£’000
2022
£’000
Short-term employment benefits 1,952 1,466
30 IAS 29 Financial Reporting in Hyperinflationary Economies
The Turkish economy was designated as hyperinflationary from 19 April 2022. As a result, application of IAS 29 Financial
Reporting in Hyperinflationary Economies has been applied to all Stelrad Group plc entities whose functional currency
is the Turkish Lira. IAS 29 requires that adjustments are applicable from the start of the relevant entity’s reporting period.
For Stelrad Group plc that was from 1 January 2022. The application of IAS 29 includes:
• adjustment of historical cost non-monetary assets and liabilities for the change in purchasing power caused by inflation
from the date of initial recognition to the balance sheet date;
• adjustment of the income statement for inflation during the reporting period;
• the income statement being translated at the period-end foreign exchange rate instead of an average rate; and
• adjustment of the income statement to reflect the impact of inflation and exchange rate movement on holding monetary
assets and liabilities in local currency.
IAS 29 was applied to the results of the Group’s Turkish subsidiary in the year ended 31 December 2022. On 1 January 2023, the
functional currency of the Turkish business was changed from Turkish Lira to Euro and, as a result, IAS 29 is no longer being
applied after this date.
Reconciliation of opening equity at 1 January 2022
The differences between the closing equity at 31 December 2021 and the opening equity at 1 January 2022 have been
recognised as an IAS 29 adjustment in the consolidated statement of changes in equity.
£’000
Retained earnings at 31 December 2021 57,814
IAS 29 adjustment 8,327
Retained earnings at 31 December 2021 (restated) 66,141
The IAS 29 adjustment at 1 January 2022 is made up as follows:
At 1 January
2022
£’000
Property, plant and equipment 9,395
Inventories 1,183
Prepayments 33
Deferred tax liability (2,284)
IAS 29 adjustment 8,327
Statement of changes in equity for the year ended 31 December 2022
The impact of the restatement of the opening reserves of entities whose functional currency is the Turkish Lira was £22,982,000;
this was credited to the statement of changes in equity in the year ended 31 December 2022 and subsequently reversed
through the “monetary losses – net” line in the income statement.
Year ended
31 December
2022
£’000
Retained earnings credit 22,982
Stelrad Group plc Annual Report 2023130
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
30 IAS 29 Financial Reporting in Hyperinflationary Economies continued
Statement of changes in equity for the year ended 31 December 2022 continued
Monetary losses – net for the year ended 31 December 2022
The monetary loss for the year ended 31 December 2022 is made up as follows:
Year ended
31 December
2022
£’000
Retained earnings (22,982)
Property, plant and equipment 11,046
Inventories 234
Prepayments (16)
Income statement 3,858
Monetary losses – net (7,860)
31 Capital management
For the purpose of the Group’s capital management, capital includes issued capital and all other equity reserves attributable
to the equity holders of the parent. The primary objective of the Group’s capital management is to maximise the shareholder
value. In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it
meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements.
Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have
been no breaches in the financial covenants of any interest-bearing loans and borrowings in the current year. The Group
manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the
financial covenants.
Details of the issued capital and reserves are shown in note 26. Details of interest-bearing loans and borrowings are shown
in note 20.
32 Financial instrument disclosures
A. Fair value measurement hierarchy
The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.
Year ended 31 December 2023
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Liabilities measured at fair value
Derivative financial liabilities
Foreign exchange forward contracts – GBP/EUR 199 199 — —
Foreign exchange forward contracts – EUR/USD 119 119 — —
318 318 — —
Level 1: Quoted prices in active markets.
Level 2: Significant observable inputs.
Level 3: Significant unobservable inputs .
B. Hedging activity and derivatives
Derivatives not designated as hedging instruments
The Group uses foreign exchange forward contracts to manage some of its transaction exposures. Where used, foreign
exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign
currency exposure of the underlying transactions, generally from one to twelve months.
Hedge of net investments in foreign operations
Included in subsidiary loans at 31 December 2023 and at 31 December 2022 were Euro denominated borrowings which have
been designated as a hedge of the net investments in the Group’s overseas subsidiaries. This borrowing is being used to hedge
the Group’s exposure to the Euro foreign exchange risk on these investments.
Gains or losses on the retranslation of this borrowing are transferred to other comprehensive income/(expense) to offset
any gains or losses on translation of the net investments in the subsidiaries. There is no ineffectiveness in the years ended
31 December 2023 and 31 December 2022.
Annual Report 2023 Stelrad Group plc 131
32 Financial instrument disclosures continued
C. Fair value of financial instruments at amortised cost
Carrying amount
Fair value
2023
£’000
2022
£’000
2023
£’000
2022
£’000
Financial liabilities
Lease liabilities 9,871 10,036 9,871 10,036
Revolving credit facility – GBP 46,900 55,250 46,900 55,250
Revolving credit facility – Euro 10,399 10,647 10,399 10,647
Term loan 24,563 25,150 24,563 25,150
91,733 101,083 91,733 101,083
The external loan balances are stated gross of any issue costs.
Management assessed that the fair values of cash and cash equivalents, trade and other receivables, trade and other payables
and other current assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these
instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a
current transaction between willing parties.
The following methods and assumptions were used to estimate the fair values:
• The Group enters into derivative financial instruments with various counterparties, principally financial institutions.
Derivatives valued using valuation techniques with market observable inputs are interest rate swaps and foreign exchange
forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using
present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign
exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodity.
• Fair values of the Group’s interest-bearing loans and borrowings are determined by using the DCF method using a discount
rate that reflects the issuer’s borrowing rate as at the end of the reporting year. As the external debt is all at variable rate, the
fair values are deemed to be identical to the carrying values.
• The financial liabilities which are not recognised at fair value but for which fair value is disclosed are deemed to be level 2
hierarchy measurements.
• There are not deemed to be any significant unobservable inputs to valuation.
D. Financial risk management objectives and policies
The Group’s principal financial liabilities, other than derivatives, comprise interest-bearing borrowings and trade and other
payables. The main purpose of these financial liabilities is to finance the Group’s operations.
The Group’s principal financial assets include trade and other receivables, and cash and cash equivalents that derive directly
from its operations. The Group also enters into derivative transactions. Due to timing, there are unsettled derivative contracts
as at the end of the reporting year.
The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management
of these risks. All derivative activities for risk management purposes are carried out by individuals that have the appropriate
skills, experience and supervision. It is the Group’s policy that no trading in derivatives for speculative purposes may be undertaken.
The Group has established a risk and financial management framework, the primary objectives of which are to protect the
Group from events that may hinder the achievement of financial performance objectives. These are summarised below.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk comprises three types of risk: interest rate risk, currency risk and commodity price risk. Financial
instruments affected by market risk include interest-bearing borrowings and derivative financial instruments.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to long-term
interest-bearing borrowings.
The Group manages its interest rate risk by entering into interest rate swaps, where deemed appropriate, in which it agrees
to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference
to an agreed-upon notional principal amount.
At 31 December 2022 and 31 December 2023, no interest rate swaps are in place. Approximately 11% (2022: 10%) of the Group’s
borrowings are at a fixed rate of interest.
Stelrad Group plc Annual Report 2023132
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
32 Financial instrument disclosures continued
D. Financial risk management objectives and policies continued
Market risk continued
Interest rate risk – sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and
borrowings affected. The analysis does not include cash balances. With all other variables held constant, the Group’s profit
before tax would be impacted as follows:
Year ended 31 December 2023
Increase/
decrease
Effect on profit
before tax
£’000
SONIA/Euribor +0.5% (469)
SONIA/Euribor -0.5% 469
Year ended 31 December 2022
Increase/
decrease
Effect on profit
before tax
£’000
SONIA/Euribor +0.5% (384)
SONIA/Euribor -0.5% 384
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to
the Group’s operating activities (when revenue and expenses are denominated in different currencies) and the Group’s net
investments in foreign subsidiaries.
The Group manages its foreign currency risk by hedging transactions that are expected to occur within a maximum twelve-
month period. There were foreign currency exchange contracts in place at 31 December 2023. No foreign currency exchange
contracts were in place at 31 December 2022.
The Group hedges its exposure to fluctuations on the translation into GBP of its foreign operations by holding net borrowings
in foreign currencies, including intercompany loans.
Foreign currency risk – sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in the Euro, USD and TL exchange rates, with
all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary
assets and liabilities including non-designated foreign currency derivatives. The Group’s exposure to foreign currency changes
for all other currencies is not material.
The net gain/(loss) on qualifying hedges of net investments in foreign operations disclosed in the consolidated statement of
comprehensive income arises from changes in Euro denominated borrowings in the hedge of net investments in European
operations. These movements will offset the translation of the European operations’ net assets into GBP – this movement
is not shown.
Change in
Euro rate 
(1)
Effect on profit
before tax
£’000
2023 +10% (17)
-10% 21
2022 +10 % (336)
-10% 411
Change in
USD rate 
(1)
Effect on profit
before tax
£’000
2023 +10% (7)
-10% 9
2022 +10 % 1,869
-10% (2,285)
(1) A + movement indicates GBP strengthening relative to the other currency.
Annual Report 2023 Stelrad Group plc 133
32 Financial instrument disclosures continued
D. Financial risk management objectives and policies continued
Market risk continued
Foreign currency risk – sensitivity continued
Change in
TL rate 
(1)
Effect on profit
before tax
£’000
2023 +10% 529
-10% (646)
2022 +10 % n/a
-10% n/a
(1) A + movement indicates GBP strengthening relative to the other currency.
Commodity price risk
The Group is affected by the price volatility of certain commodities. Its operating activities require a continuous supply of steel
which poses a risk due to the volatility of the price of the steel. The Group seeks to manage its exposure to commodity price risk
by holding enough stock to negate short-term price fluctuations and if necessary allow sufficient time to pass price changes
through to customers.
Demand risk
The market for the Group’s goods is subject to movements in demand as the demand for new housing or upgrades to existing
housing stock varies. The Group manages these variations through careful forecasting and flexing of production volumes.
Financing arrangements anticipate demand changes and associated working capital movements.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from
its financing activities, including deposits with banks and other financial institutions, foreign exchange transactions and other
financial instruments.
Trade receivables
Customer credit risk is managed by each business unit. Overseas subsidiaries have credit insurance policies in place to
minimise the risk of trade debts going bad without recompense. UK subsidiaries have no credit insurance policy in place due
to the cost of insurance not being justified by the low risk of non-recoverability with a large proportion of receivables being due
from the three major customers with strong credit ratings.
Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined
in accordance with this assessment.
Outstanding customer receivables are regularly monitored.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number
of minor receivables are grouped into homogeneous groups and assessed for impairment collectively. The calculation is based
on actual incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class
of financial assets.
The Group does not hold collateral as security. The Group evaluates the concentration of risk with respect to trade receivables
as medium, as it has several large customers in linked markets.
Note 22 discloses information about the credit risk exposure on the Group’s trade receivables using a provision matrix.
Deposits with banks and other financial institutions
Credit risk from balances with banks and other financial institutions is managed by the Group’s treasury team in accordance
with the Group’s policy. Investments of surplus funds are made only with approved counterparties. The Group’s maximum
exposure to credit risk is the cash and cash equivalents balance outlined in the balance sheet at 31 December 2023.
Liquidity risk
Liquidity risk for the Group arises from the management of working capital commitments and meeting its financial obligations
as they fall due. The Group monitors its exposure to the risk of a shortage of funds using monitoring requirements on a daily
basis looking out over various time periods. The Group’s objective is to maintain a balance between continuity of funding
and flexibility through the use of bank loans, bank revolver and finance leases. The Group’s policy is that not more than 10%
of borrowings should mature in the next twelve-month period.
Approximately 2.7% of the Group’s debt will mature in less than one year at 31 December 2023 (2022: 1.5%) based on the
carrying value of borrowings reflected in the financial statements. The Group assessed the concentration of risk with respect
to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available.
At 31 December 2023, the Group had available £18,728,000 (2022: £10,130,000) of undrawn committed borrowing facilities.
Stelrad Group plc Annual Report 2023134
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
32 Financial instrument disclosures continued
D. Financial risk management objectives and policies continued
Liquidity risk continued
The table summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.
Interest-bearing loans comprise interest and principal, with interest determined based on rates prevailing at the balance sheet
date. The foreign exchange forward contracts are subject to both a cash outflow and also a cash inflow and these are reported
on a net basis in the analysis below.
Year ended 31 December 2023
<1 year
£’000
1 to 5 years
£’000
>5 years
£’000
Total
£’000
Lease liabilities 2,582 7,826 — 10,408
Interest-bearing loans 6,240 90,142 — 96,382
Trade and other payables 72,371 — — 72,371
Derivatives not designated as hedges – foreign exchange
forward contracts 318 — — 318
81,511 97,968 — 179,479
Year ended 31 December 2022
<1 year
£’000
1 to 5 years
£’000
>5 years
£’000
Total
£’000
Lease liabilities 1,627 6,773 1,911 10,311
Interest-bearing loans 4,829 94,462 — 99,291
Trade and other payables 93,169 — — 93,169
99,625 101,235 1,911 202,771
33 Reconciliation of alternative performance measures
The Group uses some alternative performance measures to monitor and assess the underlying performance of the business.
These measures include adjusted operating profit and adjusted profit for the year. These measures are deemed useful as they aid
comparability year on year. The use of alternative performance measures compared to statutory IFRS measures does give rise to
limitations, including a lack of comparability across companies and the potential for them to present a more favourable view. Further,
these measures are not a substitute for IFRS measures of profit. Alternative performance measures are defined in the glossary of
terms on page 21. Alternative performance measures are reconciled to the appropriate financial statements line item being disclosed.
On 1 January 2023, the functional currency of the Turkish business was changed from Turkish Lira to Euro and, as a result, IAS 29
is no longer being applied after this date. As a result of the change in functional currency, the foreign exchange differences are
no longer adjusted for in the Group’s alternative performance measures and the IAS 29 differences no longer arise.
Reconciliation of adjusted profit for the year and adjusted earnings per share
2023
£’000
2022
£’000
Profit for the year 15,424 4,309
Adjusted for:
Exceptional items 2,466 1,809
Amortisation of customer relationships 141 57
Foreign exchange differences (2022 only) — 3,446
Impact of IAS 29 (2022 only) — 13,906
Tax on exceptional items (651) (462)
Tax on foreign exchange differences (2022 only) — (656)
Tax on amortisation of customer relationships (39) (16)
Tax on impact of IAS 29 (2022 only) — 1,940
Adjusted profit for the year 17,341 24,333
Basic weighted average number of shares in issue 127,352,555 127,352,555
Diluted weighted average number of shares in issue 127,352,555 127,352,555
Earnings per share
Basic earnings per share (pence per share) 12.11 3.38
Diluted earnings per share (pence per share) 12.11 3.38
Adjusted earnings per share
Basic earnings per share (pence per share) 13.62 19.11
Diluted earnings per share (pence per share) 13.62 19.11
Annual Report 2023 Stelrad Group plc 135
33 Reconciliation of alternative performance measures continued
Reconciliation of adjusted operating profit and EBITDA
2023
£’000
2022
£’000
Operating profit 26,681 22,628
Adjusted for:
Exceptional items 2,466 1,809
Amortisation of customer relationships 141 57
Foreign exchange differences (2022 only) — 3,446
Impact of IAS 29 (2022 only) — 6,040
Adjusted operating profit 29,288 33,980
Adjusted for:
Depreciation (excluding IAS 29 depreciation of £1,628,000 – 2022 only) 11,615 8,072
Amortisation (excluding customer relationships) 316 106
EBITDA 41,219 42,158
Reconciliation of cash flow from operations, adjusted cash flow from operations and free cash flow
2023
£’000
2022
£’000
EBITDA (see reconciliation above) 41,219 42,158
Adjusted for:
Exceptional items (2,466) (1,809)
Loss/(gain) on disposal of property, plant and equipment 11 (220)
Share-based payments 515 250
Working capital adjustments (adjusted for foreign exchange – 2022 only) 1,609 (9,150)
Net capital expenditure
(9,360) (11,568)
Cash flow from operations 31,528 19,661
Income tax paid (7,497) (3,801)
Interest paid – net (6,246) (3,219)
Free cash flow 17,785 12,641
Cash flow from operations (see reconciliation above) 31,528 19,661
Adjusted for:
Exceptional items 2,466 1,809
Exceptional items impact on working capital (2,237) —
Adjusted cash flow from operations 31,757 21,470
2023
£’000
2022
£’000
Decrease in trade and other receivables 8,237 1,632
Decrease in inventories 12,884 5,831
Decrease in trade and other payables (20,364) (11,528)
Increase/(decrease) in provisions 2,214 (1,297)
Movement in other financial liabilities 319 —
Decrease in other pension provisions (7) (23)
Difference between pension charges and cash contributions (1,674) (319)
Foreign currency losses — (3,446)
Working capital adjustments (adjusted for foreign exchange – 2022 only) 1,609 (9,150)
Stelrad Group plc Annual Report 2023136
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
33 Reconciliation of alternative performance measures continued
Reconciliation of cash flow from operations, adjusted cash flow from operations and free cash flow continued
2023
£’000
2022
£’000
Proceeds from sale of property, plant, equipment and intangible assets 352 316
Purchase of property, plant and equipment (6,586) (9,671)
Purchase of intangible assets (507) (164)
Payment of lease liabilities (2,619) (2,049)
Net capital expenditure (9,360) (11,568)
Reconciliation of business capital employed and return on capital employed
2023
£’000
2022
£’000
Property, plant and equipment 87,247 91,604
Technology and software costs 896 755
Inventories 63,376 77, 851
Trade and other receivables 50,975 60,814
Trade and other payables (78,056) (99,214)
Provisions (4,997) (2,719)
Net employee defined benefit liabilities (4,053) (4,542)
Financial liabilities (318) —
Business capital employed 115,070 124,549
2023
£’000
2022
£’000
Adjusted operating profit 29,288 33,980
Business capital employed 115,070 124,549
Return on capital employed 25.5% 27.3%
Reconciliation of net debt and leverage
2023
£’000
2022
£’000
Total interest-bearing loans and borrowings 90,696 100,033
Cash and cash equivalents (21,442) (22,641)
Adjusted for:
Unamortised loan costs 1,037 1,050
Net debt 70,291 78,442
EBITDA (see reconciliation above) 41,219 42,158
Debt leverage ratio 1.71 1.86
Reconciliation of net debt and leverage before finance leases
2023
£’000
2022
£’000
Total interest-bearing loans and borrowings 90,696 100,033
Cash and cash equivalents (21,442) (22,641)
Adjusted for:
Unamortised loan costs 1,037 1,050
Lease liabilities (9,871) (10,036)
Net debt before finance leases 60,420 68,406
EBITDA (see reconciliation above) 41,219 42,158
Debt leverage ratio before finance leases 1.47 1.62
Annual Report 2023 Stelrad Group plc 137
33 Reconciliation of alternative performance measures continued
Loan facility covenant calculations
2023
£’000
2022
£’000
Leverage calculation
Net debt (excluding IFRS 16 lease liabilities)/adjusted EBITDA (before exceptional items and
foreign exchange differences)
Net debt (see reconciliation above) 70,291 78,442
Adjusted for:
IFRS 16 lease liabilities (9,388) (9,859)
Interest payable 789 406
Non-obligor cash excluded from the covenant calculation 3,407 2,283
Net debt (excluding IFRS 16 lease liabilities) 65,099 71,272
EBITDA (see reconciliation above) 41,219 42,158
Adjusted for:
Impact of full year acquisition (2022 only) — (178)
Foreign currency gains (2023 only*) (1,736) —
Net losses on forward derivative contracts (2023 only*) 689 —
Adjusted EBITDA (before exceptional items and foreign exchange differences) 40,172 41,980
Leverage for loan facility covenant 1.62 1.70
2023
£’000
2022
£’000
Interest cover calculation
Adjusted EBITDA (before exceptional items and foreign exchange
differences)/covenant interest
Adjusted EBITDA (before exceptional items and foreign exchange differences)
(see reconciliation above) 40,172 41,980
Finance costs 7,681 4,573
Finance income (182) (50)
Adjusted for:
Interest expense on defined benefit liabilities (357) (481)
Amortisation of loan issue costs (513) (492)
Finance charges payable on IFRS 16 lease liabilities (113) (124)
Covenant interest 6,516 3,426
Interest cover for loan facility covenant 6.17 12.25
* Not adjusted for in 2022 as already excluded in arriving at EBITDA in 2022.
Stelrad Group plc Annual Report 2023138
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
Note
2023
£’000
2022
£’000
Assets
Non-current assets
Investments 9 115,908 115,908
Amounts due from subsidiary undertakings 10 6,816 16,247
122,724 132,155
Total assets 122,724 132,155
Equity and liabilities
Equity
Called up share capital 12 127 127
Share premium — —
Retained earnings 119,565 132,028
Total equity 119,692 132,155
Current liabilities
Amounts due to subsidiary undertakings 11 3,032 —
Total liabilities 3,032 —
Total equity and liabilities 122,724 132,155
As permitted by section 408 of the Companies Act 2006, the Company’s statement of profit or loss has not been included
inthese financial statements.
The Company realised a loss of £3,249,000 for the year ended 31 December 2023 (2022: profit of £237,000). There are
no elements of ‘other comprehensive income’ in the year; accordingly, a statement of comprehensive income has not
been prepared.
The financial statements on pages 139 to 143 were approved by the Board of Directors on 8 March 2024 and signed on its
behalf by:
Annette Borén
Chief Financial Officer
Annual Report 2023 Stelrad Group plc 139
Company balance sheet
as at 31 December 2023
Attributable to the owners of the parent
Called up
share capital
£’000
Share
premium
£’000
(Accumulated
losses)/retained
earnings
£’000
Total
£’000
At 1 January 2022 127,353 13,391 (4,135) 136,609
Profit for the year — — 237 237
Total comprehensive income — — 237 237
Capital reduction (127,226) (13,391) 140,617 —
Share-based payment charge — — 250 250
Dividends paid (note 8) — — (4,941) (4,941)
At 31 December 2022 127 — 132,028 132,155
Loss for the year — — (3,249) (3,249)
Total comprehensive income — — (3,249) (3,249)
Share-based payment charge — — 515 515
Dividends paid (note 8) — — (9,729) (9,729)
At 31 December 2023 127 — 119,565 119,692
Stelrad Group plc Annual Report 2023140
FINANCIAL STATEMENTS
Company statement of changes in equity
for the year ended 31 December 2023
1 Corporate information
The corporate information of the Company is disclosed in note 1 of the consolidated financial statements.
2 Basis of preparation
The financial statements have been prepared on a going concern basis under the historical cost convention and in
accordance with United Kingdom Generally Accepted Accounting Policy (Financial Reporting Standard 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland (“FRS 102”)) in conformity with the requirements of the
Companies Act 2006.
The Company has taken advantage of the following disclosure exemptions permitted by FRS 102:
• the requirements of section 7 Statement of Cash Flows and section 3 Financial Statement Presentation, paragraph 3.17(d);
• the requirements of section 11 Financial Instruments, paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and
11.48(c); and
• the requirements of section 33 Related Party Disclosures, paragraph 33.7.
The Company financial statements are presented in GB Pounds and all values are rounded to the nearest thousand (£’000),
except when otherwise indicated.
In preparing these financial statements on the going concern basis, the Directors have considered the Company’s current and
future prospects and its availability of cash resources and financing and the Group’s financial position. The Company is directly
impacted by the Group’s going concern position which is as follows:
The Group meets its day-to-day working capital requirements through bank loan facilities which are in place up to November
2026, comprising a £76.027 million revolving credit facility and a €28.346 million term loan facility. At the year-end date, the
whole term loan was drawn along with £57.299 million of the revolving credit. The remainder of the facility and significant cash
balances of £21.442 million were available to enable day-to-day working capital requirements to be met.
As part of its year-end review, management has performed a detailed going concern review, based on severe but plausible
conditions, looking at the Group’s liquidity and banking covenant compliance, and examining expected future performance.
Based on the output of this going concern review, management has concluded that the Group will be able to continue to
operate within its existing facilities for a period of at least twelve months after the date of signing the financial statements and
as such the financial statements have been prepared on a going concern basis.
Details of the Group’s going concern assessment can be found in the Strategic Report on page 55.
3 Summary of significant accounting policies
The accounting policies outlined below have been applied consistently, other than where new policies have been adopted.
The policies applied by the Company are consistent with those set out in note 4 to the consolidated financial statements.
Thefollowing additional policies are also relevant to the Company financial statements.
A. Investments
Investments are stated at cost less any provision for impairment.
B. Share-based payments
The Company provides benefits to certain employees (including Executive Directors) in the form of share-based payment
transactions, whereby employees render services as consideration in exchange for equity instruments (equity-settled
transactions). Further details of the share-based payments accounting policy can be found in note 11 of the consolidated
financial statements.
C. Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
4 Summary of significant accounting judgements, estimates and assumptions
The following judgements have had the most significant effect on amounts recognised in the financial statements:
Investments
The Company assesses, at each reporting date, whether there is an indication that any investment may be impaired. If any
indication exists, or when annual impairment testing for an investment is required, the Company estimates the investment’s
recoverable amount. In assessing an investment’s recoverable amount, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time.
5 Employee benefit expense
The Company does not have any employees, other than Directors, and does not have any employee benefit expenses.
Annual Report 2023 Stelrad Group plc 141
Notes to the Company financial statements
for the year ended 31 December 2023
6 Directors’ remuneration
The Directors of the Company are also directors of fellow subsidiary undertakings. The Directors received remuneration which
was paid by a fellow subsidiary undertaking and not recharged to the Company. These emoluments are disclosed in the Group
Directors’ remuneration note (note 10) of the consolidated financial statements and the Directors’ Remuneration Report on
pages 74 to 87.
7 Auditors’ remuneration
The Company has incurred audit fees of £8,000 (2022: £8,000) which are borne by Stelrad Management Limited.
8 Dividends
See note 16 of the consolidated financial statements for further detail of the dividends of the Company.
9 Investments
£’000
At 31 December 2022 and 31 December 2023 115,908
As the Company is reporting under FRS 102, under section 615 of the Companies Act 2006, the Company opted to record its
investment in the shares acquired at an amount equal to the aggregate share capital only.
A list of the Company’s investments in subsidiary undertakings can be found in note 13.
10 Amounts due from subsidiary undertakings
2023
£’000
2022
£’000
Amounts due from subsidiary undertakings 6,816 16,247
The amounts due from subsidiary undertakings are repayable on demand. Interest is charged on amounts due from subsidiary
undertakings at 2.5%.
11 Amounts due to subsidiary undertakings
2023
£’000
2022
£’000
Amounts due to subsidiary undertakings 3,032 —
The amounts due to subsidiary undertakings are repayable on demand. No interest is charged on amounts due to
subsidiaryundertakings.
12 Called up share capital
2023
Number
2023
£
2022
Number
2022
£
Authorised, called up and fully paid
Ordinary shares of £0.001 each 127,352,555 127,353 127,352,555 127,353
127,352,555 127,353 127,352,555 127, 353
See note 26 of the consolidated financial statements for further detail of the called up share capital of the Company.
Stelrad Group plc Annual Report 2023142
FINANCIAL STATEMENTS
Notes to the Company financial statements continued
for the year ended 31 December 2023
13 Subsidiary undertakings
The registered address and principal place of business of each subsidiary undertaking are shown in the footnotes below the table.
The financial performance and financial position of these undertakings are included in the consolidated financial statements:
Voting rights held
Name of company
Country of
incorporation Holding
2023
%
2022
% Nature of business
Stelrad Radiator Group Limited
(1)
United Kingdom Ordinary 100 100 Holding company
*Stelrad Radiator Holdings Limited
(1)
United Kingdom Ordinary 100 100 Holding company
*Stelrad Management Limited
(1)
United Kingdom Ordinary 100 100 Management services
*Stelrad Limited
(1)
United Kingdom Ordinary 100 100 Radiator manufacturer
*Caradon Polska Sp ZOO
(2)
Poland Ordinary 100 100 Radiator distributor
*Caradon Stelrad B.V.
(3)
The Netherlands Ordinary 100 100 Radiator manufacturer
*Henrad NV
(4)
Belgium Ordinary 100 100 Radiator distributor
*Termo Teknik Holdings Limited
(1)
United Kingdom Ordinary 100 100 Holding company
*Termo Teknik Ticaret ve Sanayi A.S.
(5)
Turkey Ordinary 100 100 Radiator manufacturer
*ISG Heating Equipment (Shanghai) Co, Ltd
(6)
China Ordinary 100 100 Radiator distributor
*Caradon Heating CZ SRO
(7)
Czech Republic Ordinary 100 100 Radiator distributor
*Hudevad Radiator Design A/S
(8)
Denmark Ordinary 100 100 Radiator distributor
Noosa Holdings Jersey Limited
(9)
Jersey Ordinary 100 100 Holding company
*Radiators SpA
(10)
Italy Ordinary 100 100 Radiator manufacturer
* Held by subsidiary companies.
(1) Registered office is 69–75 Side, Newcastle upon Tyne, Tyne and Wear NE1 3JE, United Kingdom.
(2) Registered office is Zakliki Z Mydlnik Street, no. 16, 30–198 Kraków, Poland.
(3) Registered office is Kathagen 30, 6361 HG, Nuth, The Netherlands.
(4) Registered office is Welvaartstraat (HRT) 14 Map box 6, 2200 Herentals, Belgium.
(5) Registered office is Eski Buyukdere Caddesi, Park Plaza Bina No: 14 Kat: 7, 34467 Sariyer, Istanbul, Turkey.
(6) Registered office is Second floor, No.420, Fenglin Road, Xuhui District, Shanghai, P.R.China.
(7) Registered office is Ostrava-Slezská-Ostrava, Hradní 27/37, PSČ 710 00, Czech Republic.
(8) Registered office is Ambolten 37, Kolding 6000, Denmark.
(9) Registered office is 15 Esplanade, St Helier JE1 1RB, Jersey.
(10) Registered office is Strada Statale, 54 Km 21 Snc, Moimacco (UD), Italy.
The dormant subsidiaries in the Group comprise: Woolamai Group UK Limited and Henrad (UK) Limited. Both are incorporated
in the UK
(1)
and 100% of the ordinary shares are owned.
Annual Report 2023 Stelrad Group plc 143
Registered office
Stelrad Group plc
69–75 Side
Newcastle upon Tyne
Tyne and Wear
NE1 3JE
Shareholder enquiries: investorrelations@stelrad.com
Tel: +44 (0) 191 261 3301
Website: www.stelradplc.com
Registered in England and Wales
Company number: 13670010
Company Secretary
Computershare Governance Services, UK
Moor House
120 London Wall
London
EC2Y 5ET
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Tel: +44 (0) 370 702 0003
External independent auditors
PricewaterhouseCoopers LLP
Central Square South
Orchard Street
Newcastle Upon Tyne
NE1 3AZ
United Kingdom
Corporate broker
Investec Bank plc
30 Gresham Street
London
EC2V 7QN
Legal adviser
Clifford Chance
10 Upper Bank Street
London
E14 5JJ
Financial PR adviser
Powerscourt
1 Tudor Street
London
EC4Y 0AH
Tel: +44 (0) 20 7250 1446
Media enquiries: stelrad@powerscourt-group.com
Principal bankers
National Westminster Bank plc
16 Northumberland Street
Newcastle upon Tyne
NE1 7EL
Barclays Bank PLC
1 Churchill Place
London
E14 5HP
Stelrad Group plc Annual Report 2023144
ADDITIONAL INFORMATION
Shareholder information
Stelrad’s commitment to environmental issues is
reflected in this Annual Report, which has been
printed on UPM Finesse Silk, an FSC
®
certified
material. This document was printed by OpalX using
its environmental print technology, which minimises
the impact of printing on the environment, with 99%
of dry waste diverted from landfill. Both the printer
and the paper mill are registered to ISO 14001.
Stelrad Group plc
69–75 Side
Newcastle upon Tyne
Tyne and Wear
NE1 3JE
Stelrad Group plc Annual Report 2023